What is "inflation"?

We talk and hear more and more about inflation. Or the price of goods. Or the minimum consumption basket. What is the connection between them and what do they mean for us? 🤔

Let's start at the beginning: the price of goods and services can change at any time because that's the way it is in a market economy. When the increase is generalised, we speak of inflation. 📈

The evolution of consumer prices is a benchmark in the economy because it is linked to the welfare of the population. With the same income, the more prices rise, the less you can buy. For example, if the inflation rate is 7%, then your shopping basket is smaller than the previous year. Inflation also causes companies to pay more attention to managing production, operational and financing costs. 🕵

Price stability is a key ingredient for balanced economic growth that generates development. In November 2022, prices in Romania rose by almost 17%, the highest level since 2003. The low was in May 2016, when we had a fall of 3.46%.

Price stability = growth at annual rates of around 2%.

Price stability means consumer prices rising at annual rates of around 2%, the inflation target level of the central banks of the United States and the Eurozone. 

This allows companies to allocate resources more efficiently during periods of slow consumer price growth and enables the population to make better informed consumption decisions. In this context, we are witnessing increased productivity in the economy, with a positive impact on the welfare of the population.

You can find more details on all of the above in our Blog article:"Inflation now, a spike". 🙂