Creeping Inflation

Inflation is denoted as the rate at which costs rise over a certain span of time. It is generally represented as a broad measure of the increased price or increases in the costs of living in a nation. It can, however, be calculated more precisely for some products or goods over others, such as grocery products or for services such as body grooming. Inflation, in any context, refers to how much costlier a particular category of products has gotten over a specific time period, most typically a year.

Causes of Inflation

Lax monetary policy is frequently the cause of long-term high inflation. When the supply of money grows too large in comparison to the size of the economy, the currency’s unit value declines, its purchasing power lowers, and the prices rise. The quantity theory of money is one of the oldest ideas in economics, and it describes the relationship between the money supply and the size of the economy. Inflationary pressures can arise from the supply curve side of the economy. 

Supply shocks that disrupt production, such as natural catastrophes, or raise production costs, such as high oil prices, can limit the overall supply and contribute to “cost-push” inflation, in which price rises are prompted by a disruption in supply.

Different Types of Inflation

Stagflation: Stagflation is the process in which inflation is high, the economic growth is slow, and the unemployment stays high. India is approaching the phase of weak development associated with high inflation, or Stagflation, with a recent 7.35% increase in consumer price inflation. This is due to interrupted economic growth and rising unemployment, and the fact that the existing earnings are not growing at a fast enough rate to keep up with the rising costs.

Walking Inflation: Walking inflation is the type of inflation in which the rate is between 3- and 10% a year. Inflationary pressures can be bad for the economy, and the country’s economic growth is far too rapid to be sustained. Consumers begin stockpiling items in fear of a sudden price hike. As a result of the surplus demand, prices rise even higher. Walking inflation is caused by similar factors, if not identical, to those that produce all other types of Inflation. Walking Inflation is caused by either an increase in demand that exceeds the supply of services and goods or a decline in the supply of goods and services.

Running Inflation: Running inflation is a condition in an economy where the prices of goods and services increase by 10% to 20% every year. It requires monetary and fiscal measures, or else it can lead to the condition of hyperinflation.Although running inflation is not ideal, it is far better than hyperinflation, where the result is economic collapse or switching to the barter system. If the inflation rate rises to 10%, it is referred to as running inflation. 

Hyperinflation: Hyperinflation or rising inflation is when the prices of goods and services increase uncontrollably in an economy for a defined period. Out-of-control inflation is the next stage of inflation which requires rapid solutions. Often, inflation is known as hyperinflation when the inflation rate increases by more than 50% in a month. 

Creeping Inflation: This is the other name for moderate or mild inflation. This sort of inflation arises when the price level steadily grows at a low rate over a long period of time. Moderate inflation is defined as the rate of inflation that is less than 10% annually or in the single digits.

Conclusion 

In the above sections, we have learned about creeping inflation. Mild inflation or creeping inflation happens when prices rise by less than 3% per year. As per the Federal Reserve, when prices rise by less than 2%, economic growth is aided. 

Mild inflation causes customers to assume that prices will continue to rise, boosting demand. Consumers purchase immediately in order to avoid increased prices in the future. Mild inflation promotes economic growth in this way. As a result, the Federal Reserve sets a target inflation rate of 2%. We also have read about different types of inflation, such as creeping inflation, hyperinflation, walking inflation, running inflation and stagflation.