Hinnakasv

Hinnakasv is an Estonian term that translates to "price increase" or "inflation" in English. It refers to the general rise in the prices of goods and services in an economy over a period of time. When hinnakasv occurs, each unit of currency buys fewer goods and services than it did previously. This leads to a reduction in the purchasing power of money.

Several factors can contribute to hinnakasv. Demand-pull inflation happens when there is more money chasing too few goods, leading businesses to raise prices. Cost-push inflation occurs when the costs of production for businesses increase, such as through higher wages or raw material prices, and these costs are passed on to consumers in the form of higher prices. Built-in inflation, often linked to wage-price spirals, can also play a role, where workers demand higher wages to compensate for expected future price increases, which in turn drives up business costs and prices further.

The Central Bank of Estonia, Eesti Pank, monitors inflation and uses monetary policy tools to try and keep it at a stable and predictable level, typically around 2% over the medium term. High and volatile hinnakasv can be detrimental to an economy, eroding savings, distorting economic decisions, and creating uncertainty for businesses and consumers. Conversely, a low and stable level of hinnakasv is generally considered healthy.