Talking about this topic is tricky because inflation can be caused by many, many things. However all these things which may cause inflation and characterized in a simple way which is by either 1) the rate of increase or 2) a root cause.
With that being said let’s get into the topic and talk about some of the factors which may cause inflation.
Pandemics
Since the time the Covid pandemic began the inflation went through the roof especially with gas and electricity prices.
This is because people were staying at home, there were lockdown, there were shortage of employees which leads to people not being able to function as normal. Shortage of employees means that everything will take longer especially for the packages and goods to arrive to you or to the stores. This means that there are less products in the store and the price of the products which are in store will go up.
Reflation
This is one is about the way curb deflation. This happens when a government purposely stimulates the economy by increasing the money supply or even the government spending.
An example of this we have seen in the US during the Covid pandemic.
However the reflation can as well happen when a government lowers interest rates. Which means that this one is really tricky.
Deflation
This one is the opposite of inflation.
And the whole idea of deflation is a drop in prices of goods and services. But also deflation talks about a negative inflation rate.
Cost-push
This one is a very common factor of inflation because this one happens when the price of the production of different goods as well as different services go up (increases). This lead to the prices being pushed even higher.
This mostly happen when the prices of a material or the prices of labor goes rises.
Creeping
This one when the mild inflation happens in a couple of years in a row. The inflation is sometimes so low that you barely notice it but when the low inflation grows throughout couple of years the prices will hit you hard.
Just as if you were increasing the warm temperature in your house by 1 or 2 degrees every hour. You won’t notice it at once that the temperature is getting warmer but after couple of hours with increasing 1 or 2 degrees every hour you will notice the the temperature.
Hyperinflation
This one is about the extraordinary high or low inflation which is spiralling out of control. It might be 1% a year or over 1,000% a year.
Stagflation
This one is about a high inflation when an economic downturn takes place.
A good example here would be again the beginning of the Covid pandemic.
Demand-pull
This one is also a very popular cause of inflation. And this one is all about the point in time when the demand for goods and services out run the time which it takes to produce these goods or services. This leads to the prices of these goods and services to increase.
Trotting Prices
This one happens when the prices are risen moderately. But the yearly inflation rate stays in the single digits.
If you see this happening then be warned that the inflation which will slap you in the face might be around the corner.
Galloping Prices
This one takes place when the costs increase significantly into the double digits. Often when the costs rise above 10% a year.
Disinflation
This one is the last one we will talk about. And takes place when a the rate of inflation is falling. Or even when the slowdown moments in the prices of goods and services takes place
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