Meaning of falling exchange rate pushes up the price of imports and may fuel imported inflation? (Economics)

Question

I don't understand the meaning of the last 3 words - fuel imported inflation. Someone pls explain thanks!!

Answer 1

If the value of your local currency falls, it means it will take more of your currency to buy foreign goods.  So if you are an American and the dollar falls, it takes more dollars to buy goods from overseas.

Oil is a good example.  If foreign suppliers were selling oil at $100 a barrel and the dollar loses value, they will demand more dollars to buy the next barrel.

The same for autos from Japan.  They might sell the auto in the US for $10,000 today, but as the dollar falls, they may decide they need $11,000.  So for the American consumer, the price of the car went up.  For Japan, they would be getting the same value in yen, but for Americans, they would be paying more.

The fact the American is paying more and the Japanese are receiving the same value is what is meant by imported inflation.  So falling dollar values will fuel the inflation on imported goods, ergo, fuel imported inflation.