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Growing inflation affecting sustained price growth in the US

  Arguably, Inflation is one of the most common yet dreaded economic terms, in the discussion once again. According to Kristalina Georgieva, the managing director of the International Monetary Fund, the United States is going to face the brunt of inflation sooner than expected, resulting in a sustained price hike.

In simple terms, inflation can be described as an increasing charge for goods and services, over a pre-set period of time. The basic reasons behind it may be an increasing demand for something or an upsurge in the production cost. It may lead to a rise in the price for basic needs, which results in a necessary price raise.

Generally, inflation is a needed mechanism that helps the economy to stabilize and heal. However, it all becomes a major problem when the former increases dramatically, compared to the wages and earnings. If unchecked, it can result in poor living conditions in shorter term and a major economic imbalance in the longer term.

A long-standing economic growth, coupled with post-pandemic stability has resulted in a steady progression across the lifestyle and real estate sectors in the US. As a direct level of human resource utilization, consumer spending is increasing, with a predictable double-digit growth. While this optimistic level is good for the market, it also indicates a higher opportunity for a steady inflation rate in the sectors. The Federal Reserve foresees a higher rate of inflation as the country is firmly getting back on its feet.

The inflation changes, affect both the smaller and larger aspects of the national and international economic system. While an inflation rate of around two percent is normal, the realized inflation rate in the USA is around five percent now. Even some economists predicted it might happen with the global lockdown amidst the pandemic though, the pay checks will be lesser to the common people.

From the Equity market to the entertainment sector, an unchecked inflation rate can have a highly adverse effect. The savings account interest rate will gravitate towards zero, or the money in the bank may lose some percentage of the value too. The long-term bonds and stocks will be devalued to some extent as well, which will only get better while normalcy returns. There is already an evident inflation rate in the housing sector. The only hope is that it is triggered by lesser supply than demand, unlike the 2008 housing financial crisis with poor lending practices.

Inflation is the necessary evil of economic changes, as per the pundits. It is inevitable in the cycle of changes in the general price and production cycle. A country cannot, or should not try and stop inflation from happening. Instead, it should be managed in such a way that inflation may have a minimal adverse effect on the livelihood of the citizens and their economic affairs.

An efficient government can curb the negative effects on the common people through proper planning. A prior intimation of the predicted inflation, constant monitoring of daily-needed items along with aids when needed - these steps can be quite useful in battling inflation.

In a generic condition, those who have a pre-fixed earning cap can face troubles, while it is somewhat better for the borrowers. Still, a mismanaged inflation can turn to hyper-inflation, which can bring economic growth, stagnant. A carefully designed monetary policy with proper planning can efficiently tackle the inflation challenge.




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