Why inflation rate increases day by day?

Question

Why inflation rate increases day by day?

Answer 1

Some people are greedy and never have enough.

Answer 2

Everybody is wrong.  Inflation is a direct result of monetary policy set by the Federal Reserve. It is they who allow the Money Supply to Increase, thus allowing Inflation to exist.

Inflation by definition is the result of "Too Many Dollars Chasing Too Few Goods". And since the supply of dollars is set based on Fed Policy, Inflation is a result of Fed Policy. To halt inflation, the Fed has to halt the money supply. Exactly what Paul Volker did to break the back of inflation from the 70s.

People like to cite that rising prices is inflation. But you cant raise prices if the excess money doesn't exist in the economy. Look at Zimbabwe. They have high inflation because the Central Bank keeps printing new money. The more money they print, the higher the inflation. Halt the money supply, you halt the inflation.

Answer 3

main reason is increasing in crude oil  and more liquidity of money is also liable for it

Answer 4

Inflation is a macroeconomic concept and is a rise in the general level of prices of all goods and services over a period of time. If the price of houses or Coca-Cola or CD's goes up this is not necessarily because of inflation. It may be because of real changes in the costs of production or demand for these goods. As such inflation reduces the purchasing power of money. In economic circles there are 2 types of inflation, demand-pull and cost-push. One or both of these factors combined can cause a rise in inflation, wheather its day by day remains to be measured but in severe cases of inflation daily rises would be possible.

Answer 5

it goes in hidding during night.

Answer 6

The main reason is inability to restrain money supply in the market. As liquidity goes up more money gets into consumers' hands who don't mind paying an extra buck for the commodity he needs, every time he visits the mall, simply because he can afford it. The excess liquidity can be mopped up by the banks by increasing their interest rates. It makes money costly for borrowers and is an incentive for spenders to 'park' their excess money in banks, even cutting down on frivolous or superfluous expenditure. But this mechanism cannot distinguish producers of goods with genuine need for money. Producers put the extra cost of credit on consumers' head contributing inflation in turn. This one-dimensional leverage (interest rate) of banking system is the chief drawback of lending institutions that warrants judicious use of this mechanism. This needs to be tackled by a suitable well-thought out strategy by financial institutes. They may hastily, resort to differential rates of interest that always ends in a fiasco. The prudent method is to coax the government to underwrite the expense incurred on lower interest rate (government lending as welfare measure), or government subsidising commodity prices, or such cross-subsidisation of products of the same stream (petroleum products). Then, the functioning of banking system is protected from a tendency to collapse. But the government footing the bill will go into extra taxes or less expenditure in creating national assets.

Also, Central banks that are responsible for currency management resort to printing extra currency (and such instruments) on the sly, goaded by the government. It is done in the hope that situation will improve in the coming year. This borrowing from future uncertain earnings is speculation and not banking.  It is a gamble that rarely pays.

Supply constraint is another factor looming large over other factors. Number of goods or their inability meet the demand pushes up prices. Inflation is calculated on a basket of goods and services needed for an average consumer, with the weightage given to each according to its necessity and picks up in scarcity period.

Supply side constraint (scarcity) may be 'imported' like in the petroleum imports. OPEC has achieved monopoly by Cartelisation of petroleum producing countries which is a blow to free market. Then governments become helpless, unless there is a concerted, unified (by the government and the citizenry) effort to rope in the price rise by restricting demand. It can be done by finding alternatives like Brazil substituting petrol partly with 'Ethanol' that is abundant there, for petroleum products. Or tightening the belt - reducing the need for transportation by motorised vehicles and transacting business on phone as alternate strategy, where possible.

Answer 7

The rate of inflation will always grow with the rate of down in agricultural. Unless increase the productivity of agricultural products it is neither controll nor decrease inflation.