Creeping inflation

Inflation is a rise in the general level of prices of goods and services over a period of time. In everyday lingo, it is usually associated with steep price increases, but in fact refers to any increase, however big or small.

Creeping inflation is defined as the circumstance where the inflation of a nation increases gradually, but continually, over time. The relatively small effect of creeping inflation, when viewed long-term, actually adds up to a pretty significant increase in the cost of living.

Compared to galloping inflation or hyperinflation, creeping inflation is preferable. To ensure that inflation is kept at a low but positive level, governments task an agency/institution (usually central banks) to keep government funds lending rate at a low level. Note that it is important to keep the inflation level positive since negative levels, or deflation, can also have negative effects to the economy.

All in all, creeping inflation is actually what the government needs to keep a stable economy–it doesn’t have an adverse effect, unless wages do not follow.

It is important for governments to keep an eye on creeping inflation to ensure that wages are increased along with price increases. Governments usually do this by setting minimum wages.
However, this does not address the problem of common workers who get paid more than the minimum wage but to not get periodical salary appraisals.

Leave a response

Leave a Response