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INFLATION A GLOBAL PROBLEM

Inflation

Harvest Global Markets :

Inflation is a persistent increase in the general price level of goods and services & a fall in purchasing power. Central banks attempt to limit inflation and avoid deflation in order to keep the economy running smoothly. Inflation report is also called Consumer Price Index (CPI) as Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. The Federal Reserve generally aiming for an inflation rate of 2% per annum. Since the start of 2022 when the world was in recovery phase from the pandemic, it soon encountered another hurdle which is Global Inflation. The major economies faced inflation levels that were lastly visible in the 2008 financial crisis. The US inflation rate peaked at 9.1% in June 2022 a four-decade high figure which was last seen in year 1982.

UK inflation rose to 11.10% in November 2022 and European inflation also peaked at 10.60%. In order to control inflation, the most renowned way of central banks is to introduce Contractionary monetary policy which considers increase in interest rates. The central bank of US Federal Reserve Bank increased its interest rate by 425 basis point in 2022, which proved to be fruitful in controlling inflation since as of now the inflation rate has decreased to 7.1% and latest inflation figures are due on Thursday at 1830 PKT & inflation is expected to plunge to 6.50%.

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