2020 changed the financial trajectory of the world and forced governments to bail their own citizens out. The transfer of liquidity disrupted the market equilibrium. The U.S. Senate, for example, approved a bill that rushed cash into the hands of millions of Americans. That money wasn’t earned, nor did it come from market innovation. Settling the score now, which is the U.S. balance, results in higher prices. The business market also wants to make up for its losses.
Adjusting to Uncertainty
Uncertainty is a key trend behind the influx of inflation in 2022. When businesses aren’t sure about their expenditures, the costs they incur will fall onto the consumer. Also, the uncertainty in how efficient goods can be produced and transported became leading factors. During COVID, the nation saw shipping ports backed up as far as the eye could see. Even today, reports are only just starting to show progress being made. Such uncertainties also caused prices to rise.
Politics and War
Inflationary trends also revolve around global conflicts and military tensions. Behind the war ragging in Ukraine is a struggle for many nations to manage their energy supplies. Oil is the main culprit, and Europe’s supply of Russian oil puts the EU in a political stalemate. Russia continues to advance in Ukraine, but the oil and gas consumed by Ukraine’s European neighbors is bought from Russia. This energy dependence is a trend that’s raising global prices.
Your understanding of inflation is more important than it might seem. Failing to adjust your spending or reassess your finances now can be a regretful mistake.