Inflation: Causes, Management, and Impact

Inflation

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Causes..........................................................................................................................................3
How Central banks manage inflation..........................................................................................3
Inflation Rate in Euro area, Uk and Us in February 2021...........................................................4
Monetary Policy and Fiscal Stimulus Packages..........................................................................5
CONCLUSION................................................................................................................................6
REFRENCES...................................................................................................................................7
Books and Journal........................................................................................................................7

INTRODUCTION
Inflation is the concept which refers to the increasing in the price of several goods and
services of common used like housing recreation transport clothing food and several more.
Inflation rate is evaluated by the average price change in a services and commodities over time.
This report is going to explain about the factors which contributed to the low rates of inflation in
the euro area. Also, the path of the inflation in 2021 which support monetary policy and fiscal
stimulus packages.
MAIN BODY
Inflation rate overcome the purchasing power of every unit of the currency that it leads
towards the racing in the price of the product and services which are provided by the company. It
is the economic term which termed as the person have to spend more in order to to buy a gallon
of milk or to get a haircut or to fill each in anything. Since early 2013, inflation in the euro zone
has been slowly declining, eventually turning negative at the end of 2014. Energy prices have
played a part in the downturn, but the weakening of overall demand has also played a role. The
inflation rate in U.S has overcome the values of the dollar. The inflation rate is the percentage
which is measured through the increasing or decreasing in the price in particular period of time
or usually a month or year. The inflation rate percentage describe that how quickly the prices are
increasing and decreasing in particular time period (Tasinato, 2021). If the inflation rate is
become high as compared to the 50% in a month then it is called hyperinflation and if the
inflation occurs at the particular same time then it is called as stagflation. Increasing pricing of
housing gold or stock are known as asset inflation.
Causes
There are generally two causes of inflation which is demand that pull the inflation when
the demand out spaces supply for the goods and services. The second cause of inflation is cost
push inflation in which when the supply is restricted but the demand of the product is high. There
are some more sources which days in the money supply this is also cause of inflation.
How Central banks manage inflation
Monetary policy is used by central banks all around the world to avoid inflation and deflation. In
the United States, the Federal Reserve targets for a year-over-year inflation rate of 2%(Airaudo,
Buffie and Zanna, 2016)(Gagnon and Collins, 2019).The FOMC declared on August 27, 2020
that it would approve a target inflation rate of more than 2% if it would help ensure full jobs. It
continues to aim for 2% inflation over time, but is able to accept higher prices if inflation has
been poor for a long time.