Decreased Purchasing Power
Inflation refers to the increase of prices over time. When inflation runs out of control it can have significant negative impacts on a country’s ability to provide services to its citizens. For families, inflation affects purchasing power for everyday items such as groceries and clothing. In essence, inflation decreases purchasing power for individuals, businesses, and governments.
Problems of Lingering Inflation
Amidst the global phenomenon of rising costs Norway, Brazil, South Korea, and New Zealand have all raised their prime interest rates. Some economists believe it is just a matter of time before Canada and the United States will follow suit and raise their prime lending rates too. Given the significant disruptions throughout the global supply chain caused by the pandemic, it is unlikely that the global trend of rising inflation will end anytime soon.
What is Stagnation?
Stagnation is a term used to describe a prolonged period of time where there is little or no growth in an economy. Rising inflation rates are flagged as contributing to the slowing of economic growth. Realistically, economic growth of less than 2% GDP is considered stagnation. Perhaps the scariest part of a stagnated economy is how they are punctuated with high unemployment and involuntary part-time jobs.
The Near Future
Given that most countries rely heavily on economic growth to balance the books, surging commodity prices combined with the increased demand for supplies will continue to complicate matters for policymakers. Ongoing labour shortages will also continue to complicate economic recovery.
Elaine Allan, BA, MBA
Technology & Business Blogger
Vancouver, BC, Canada