inflyatsiya

Inflyatsiya, translated as inflation, is the sustained increase in the general price level of goods and services in an economy over time, leading to a fall in the purchasing power of money. It is commonly measured by changes in a price index such as the consumer price index (CPI) or the GDP deflator. Core inflation excludes volatile items like food and energy to reveal underlying price trends.

Inflation arises from various forces. Demand-pull inflation occurs when aggregate demand grows faster than the economy’s capacity to produce. Cost-push inflation results from higher production costs, such as wages or commodities, passed through to prices. Built-in inflation reflects price-wage spirals anchored by expectations. Monetary expansion and depreciation of a currency can fuel inflation as well.

The effects are mixed. Moderate inflation is often associated with economic growth and is a policy target, but high or volatile inflation erodes purchasing power, harms savers, and increases uncertainty. It can distort relative prices, discourage long-term planning, and complicate debt management. Central banks commonly target low and stable inflation and may adjust interest rates or use other instruments to anchor expectations.

Types include creeping inflation (low but persistent), galloping inflation (rapid increases), and hyperinflation (extreme, accelerating inflation). Historical episodes include the high inflation of the 1970s in many advanced economies, and episodes of hyperinflation in Zimbabwe and Venezuela.

Policy responses focus on credible monetary policy, often inflation targeting, supported by fiscal discipline and, if needed, supply-side reforms to raise productive capacity.