You may have heard that the economy needs inflation for healthy growth, which will be our main topic today. Inflation is rising, and the pandemic has shown us that it can rise much faster and higher than expected. Governments have assured that inflation will not rise as much and will remain elevated for a limited period of time to get the economy back to normal. But is this the case? Let’s take a look.
The economy and inflation
Prices of goods and services are rising at a rocketing pace. This should be a temporary condition, but business leaders offer unique insight. They are exposed to ever-increasing raw material and labor costs. They agree on one thing, and that is that inflation may not be temporary, but it could last longer and inflation could be worse than people anticipate. These executives are the ones who set the prices of goods and services, and they perceive a constant rise in prices because they have to raise the prices they charge.
It is quite possible that many people will take these words as an exaggeration. But the truth is that even these views need to be taken seriously. Some CEOs choose to raise prices and others choose not to pass on inflation. This might help them in getting more customers at lower prices. So, it could be a smart strategy, but one also needs to consider the fact that the yield will be lower and there is also a chance that these businesses may temporarily fall into loss.
This is the first time executives have been vocal about inflation. It should also be added that many people have turned to alternative ways of storing value, such as cryptocurrencies, because of inflation. It is therefore important to take these statements into account. The CEO’s concern was also reflected in other inflation reports. For these reasons alone, it is quite possible that the current economy will not return to normal for some time.