Inflation in 2022 – Q and A

Inflation has been an ever present topic in 2022. The recent confirmation that prices are rising at their fastest point in 40 years has prompted us at WhiteFin to answer some key questions-

What is inflation?

Inflation is a measure of the average price level of goods and services over time. When inflation rises, it can mean that the buying power of a currency is decreasing. This can have a number of effects on the global economy, including:

-Making it more difficult for people to afford basic goods and services

-Leading to higher interest rates, as lenders want to be compensated for the increased risk of holding currency that may lose value

-Making it more difficult for businesses to invest and plan for the future, as they may not know how much prices will change in the future

All of these effects can lead to slower economic growth and higher levels of unemployment. In some cases, inflation can also lead to social and political instability. It is therefore important to keep an eye on inflation rates and make sure they stay within reasonable levels.

What causes Inflation?

Inflation is the increase in the price of goods and services in an economy over a period of time. It happens when there is too much money in circulation, therefore devaluing said currency. This happens when the government prints too much money, or when commercial banks create too many loans. When this happens, the value of money falls, and prices for goods and services go up. Inflation can be good or bad for an economy, depending on what is causing it and how high the inflation rate is.

How can Inflation be controlled?

There are two main ways to control inflation: monetary policy and fiscal policy. Monetary policy is the use of the money supply to influence the economy. Fiscal policy is the use of government spending and taxation to influence the economy. The Federal Reserve, which is the central bank of the United States, uses monetary policy to control inflation. The Federal government, which is Congress and the President, uses fiscal policy to control inflation. In most cases, the Federal Reserve and the Federal government work together to control inflation.

Why is inflation such a hot topic?

Inflation is actually an ever-present topic- it has been steadily rising year on year since 2009. So, it is safe to say that increasing inflation isn’t going away. However, prices are going up at their fastest rate since the early 1980s.

Let’s look at the UK as an example: –

The Consumer Prices Index (CPI) is a measure of inflation calculated by the Office for National Statistics (ONS). The CPI measures the change in the price of goods and services bought by households. The CPI has risen by 5.5% in the 12 months to January 2022.

This is the highest 12-month CPI increase in over 10 years.

A key contributor to this could be the increase in printed money by the government since the Coronavirus crisis.

In the UK, over £1trillion has been printed in new banknotes and coins since the outbreak of Covid-19. The Bank of England has said that it will continue to print money to ensure that there is enough cash available for people and businesses. This is referred to as ‘quantitative easing’.

What can people do to combat inflation?

There are numerous different ways that people can combat inflation. One way is to keep an eye on prices and shop around for the best deals. People should also consider investing their money in assets that are likely to grow in value over time, such as gold, silver and stocks.

WhiteFin and its network of 13 entities across Europe can help by offering candidates access to new jurisdictions where they can apply their skill sets for higher remuneration.

Please contact a member of our sales team on +44 (0) 208 036 3015 or info@whitefinsolutions.com for more information.