Inflation

Inflation

This is the continuous rise in the general price level

or

This is the fall in the value / purchasing power of money

Cost-push inflation.

Any increase in the general level of prices due to an increase in the costs of

production/costs of inputs faced by the producer. For example increased wage demands due to minimum wage or social partnership agreements.

Indirect taxes imposed on business such as VAT and excise duties on goods.

Increased prices for raw materials e.g. oil.

Increased costs of production e.g. utility charges; costs of rent; insurances

Demand-pull inflation.

Any increase in the general level of prices due to a lack increase in the number of goods and services to match increase in the money supply/consumer incomes.

The Harmonised Index of Consumer Prices:

This is the Eurozone measure of inflation. The ECB’s price stability objective is measured against the HICP. It calculates a weighted index for both the Eurozone and the countries outside the Eurozone but who are part of the EU.

There is a 91% cross-over between the HICP and the CPI.