Inflation explained: What lies behind and what is ahead?

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4.8 • 13 Ratings

🗓️ 30 September 2022

⏱️ 7 minutes

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Summary

Inflation is defined as a process of continuously rising prices and falling purchasing power. In other words, a general and broad-based increase in the price of goods and services over an extended period. The main objective of central banks is to keep prices stable, to preserve the integrity and purchasing power of people's money. The most common inflation indicator measures the average change in the price of a basket of consumer goods and services over time. The closest approximation of what people intuitively understand by the term inflation is the change in their cost of living. Inflation is expected to remain significantly above the euro area inflation target of 2 % for some time, due to continued geopolitical uncertainty and persistent supply bottlenecks.

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Transcript

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0:00.0	Welcome to the European Parliamentary Research Service Podcasts.
0:06.0	In this podcast, we'll review the current inflationary trends in Europe and worldwide,
0:11.0	paying attention to what lies behind and especially what is ahead.
0:15.0	Want to know more? Stay with us.
0:18.0	The financial firm says inflation in the country could exceed as much.
0:26.6	Inflation is back in Europe.
0:28.6	After years of relative price stability, inflation rates in the EU saw to 10.1% and to 9.6% in the euro area, mainly driven by energy prices, which rose by 39% in
0:42.5	August this year, and food prices which went up by almost 11%. As a result, many families are
0:49.7	struggling to make ends meet. And this is not only happening in Europe, but on a global scale.
0:55.0	Almost half of all countries classified as advanced economies by the International Monetary Fund
1:00.6	recorded inflation rates above 5% in 2021, with the US being the canary in the coal mine.
1:08.1	But what is inflation exactly, and how is it measured?
1:11.6	Well, in a market economy, prices can always change. Some prices rise, some prices fall.
1:19.6	But inflation occurs when there is a broad increase in the prices of goods and services,
1:24.6	not just of individual items over an extended period of time.
1:28.5	So basically, life becomes more expensive. Now, how do we measure that?
1:33.4	There's several ways of doing this, but in the euro area, consumer price inflation is measured
1:38.7	by the harmonized index of consumer prices, or HICP, which is applied by all EU countries.
1:46.6	This is calculated on the basis of a shopping basket containing over 700 goods and services
1:51.9	on which people typically spend their money.
1:54.5	When calculating the average increase in prices, the prices of products we spend more on,
1:59.9	such as electricity or petrol, are given a greater weight than the prices of products we spend more on, such as electricity or petrol,
	...

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