Inflation is an economic phenomenon characterised by a long-term increase in the general price level.
This means that goods and services in an economy become more expensive on average and the purchasing power of the currency decreases. Inflation is usually triggered by an increase in the money supply in an economy. When the money supply grows faster than economic output, there is an oversupply of money that exceeds the demand for goods and services. This leads to an increase in prices as consumers have to spend more money for the same amount of goods.
Inflation can have several effects. First, it can affect consumers' purchasing power, as they have to pay more for the same amount of goods and services. Secondly, it can increase interest rates, as central banks try to fight inflation by raising interest rates. This in turn can have an impact on lending and investment.
As a rule, moderate inflation is seen as positive for the economy, as it creates incentives to spend money and make investments. Excessive inflation, on the other hand, can hamper economic growth and lead to currency devaluation.
Inflation is an important issue for central banks, governments, businesses and consumers as it affects economic stability and people's purchasing power.
