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Investors expect the interest rate to rise by 0.75 percentage points


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Inflation in the United States accelerated to an annual rate of 8.6% in MayIts fastest pace in 41 years. Consumers see a sharp rise in prices Variety of goods and services Where strong demand collides with a persistent shortage of supply.

Inflation is one of the most worrying issues facing economists and government policy makers, and it is a factor Increases the risk of economic recession in the United States. The reasons are countless, the tools commonly used To tame price pressures It could, in some scenarios, push the economy into recession.

Here’s what you need to know:

What is inflation? reflects inflation Excessive price hike or depreciation for money. It generally results from too much demand chasing too few limited goods or services, causing prices to increase. Inflated prices do not necessarily harm the economy as a whole, and only those consumers who make purchases suffer from the increase.

For example, the prices of new and used cars have risen sharply due to the shortage of vehicles due to the lack of components such as semiconductors. An increase in car prices does not necessarily affect you unless you want to buy a car.

Higher prices in a sector do not necessarily lead to general inflation in the economy. But price increases across a range of categories will weaken consumers’ purchasing power.

What causes inflation? The current wave of inflation has several causes, many of which are related to the epidemic. For example, consumers have been flocking to savings from government stimulus programs and spending on substandard services as a result of business restrictions, leading them to turn on a spigot for goods that are in short supply.

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Supply chain turmoil continues throughout the global economy, with Russia’s invasion of Ukraine And the Covid-19 cases in China Adding extra pressure. energy prices, Including standard petrol prices, has risen sharply. There is a shortage of truck drivers, seaport slots and warehouse space, which leads to costly delays and high freight rates.

There are fewer workers in the labor market, which encourages those who work to ask for increases. Lower interest rates from the Federal Reserve also made borrowing cheaper, making large purchases more attractive. The Fed is now moving quickly to make borrowing more expensive, using the central bank The primary tool for raising rates. These and many other factors lead to higher costs.

Added costs, at every step from production to sale, lead to price increases for consumers, with some companies Seize a rare opportunity to raise prices.

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