The pandemic had a fatal impact on the people from every corner of the world. The cost of living has been rapidly rising over the last few months and as thousands of people are left without jobs, the situation is even worse as many people from various countries are still struggling. Although the media often reports that the economic crisis is in the process of ending and recovery has already started, the reality is a little bit more different. The same applies to inflation rates. Recent statistics show that inflation is the law, but for everybody who truly understands the concept of inflation, it’s obvious that nothing has changed for good and probably inflation today is higher than the numbers say. 

It’s hard to believe that prices have risen by only 1% over the past year which is what central banks have been telling their customers because the Coronavirus pandemic has made living more expensive than ever. The problem with these numbers may be the fact that they calculate numbers of real output, real wages, and poverty using inflation adjustments without including the higher cost of living during the pandemic. This means that the ever-rising level of inflation hasn’t stopped at all and the world still faces economic challenges as a result. 

Can the inflation rate be controlled?

So, we can say that global inflation continues and it’s something we more or less take for granted these days, and nobody knows for sure how far it will go. Despite the reduced numbers, the governments in many countries are trying hard to reduce the rates. Usually, inflation occurs when the economy grows as a result of too much spending. It is accompanied by the rise in prices and the devaluation of the national currencies as the economy is worth less than it was before. 

There are several ways the government uses to control inflation which more or less works. For example, in the past few months, the Federal Reserve (Fed) and the federal government (feds) introduced several initiatives in the US to reduce the financial crisis but not all the measures they usually take are effective and some of them can cause damaging effects. They often try to reduce inflation through wage and price controls which can cause a recession and a high rate of unemployment. 

However, there are still many methods to fight against inflation while facing a crisis. Central banks of the countries are trying hard to use techniques such as a monetary policy which means changing the interest rates. For example, in the UK the Bank of England offers several forms of monetary financing and as a result, the inflation decreased by 0.2% in March, as the BBC reported. But as we said, the pandemic made the overall situation worse.

Governments and central banks are not the only ones who try to take measures against inflation and certain sectors also try to overcome the increased rates. Among them are ways of investment like forex trading. Based on this T1Markets review, we can easily say that most forex brokers have features in store for crisis occasions when currencies become too volatile and inflation rates grow out of proportion. Using various strategies, they try to increase liquidity which usually results in lower volatility, and as a result, reduced inflation rates. 

On the other hand, central banks try to control wages, which reduces inflationary pressures. Also, they tend to control money supplies and fiscal policies because a higher rate of income taxes can reduce spending, inflationary pressures and this can control inflation. 

Why do we care about the rate of inflation?

Sometimes perceived from distance, inflation doesn’t seem like something people should care about but looking closely, it’s a concerning matter to everyone who doesn’t want the prices in the shops or for utilities and other services to rise faster than their wages. Overtime money becomes less valuable and therefore, less important for decisions in our lives. But it’s not only about average people, but businesses also don’t want high rates of inflation and collapsing prices, when profits are reduced. This is why moderate inflation is optional for everyone, against hyperinflation or deflation. 

During the lockdown inflation of prices of most products and services fell because people were sitting at homes, losing their jobs. So spending and especially, on travel and entertainment almost stopped. The pandemic has changed the ways and tendencies of where and how people spend money. Since coronavirus hit, most of us buy more essential things, like groceries, which helps the prices go up. And spending less on airline tickets, gasoline, and clothing, pushes the prices down. All these things make inflation go up and this directly affects people’s lives which is why the changing level of inflation is a concerning matter for most of us. 

For now, it’s hard to say how far inflation can go and how it will affect the aspects of the economy, consumer spending, business and investment, tax policies, or employment rates. As the pandemic continues, inflation rates start to provide less insight into the actual living costs of average citizens. So, it’s important to rethink our measures of inflation and try targeting them, which is essential for our wellbeing. Now as we suppose that the true inflation rate has risen, dealing with the increased cost of living is harder than ever, which makes predicting the recovery impossible. Therefore, we’re still not sure when this process will end, or whether it will ever end, and the question of how far the inflation will go remains unanswered.