The question of what inflation is can be answered as follows. Inflation is an increase in prices for goods and services, which, as a rule, are no longer falling. As a result of inflation, the same set of goods and services will have a higher monetary price, and a smaller amount can be purchased for the same amount of money. All this leads to such an undesirable phenomenon as the depreciation of money, and almost always causes a negative reaction from the public.
In Russia, inflation was also significant, but has fallen sharply in the past 2 years. According to the Federal State Statistics Service, inflation in Russia in 2017 amounted to 2.5-2.7%.
Simple inflation
The simplest definition of what inflation is is the depreciation of buyer's money. For example, if before you could buy 2 packs of butter for 100 rubles, now you can buy only one for the same amount. Due to inflation, your money has become half as valuable. The negative factor when is that the monetary value of salaries and pensions for a long time can remain unchanged. This automatically leads to impoverishment of citizens.
What is money inflation in the economy?
In conditions of uncontrolled market relations, inflation almost always manifests itself in its classical form - in the form of a direct increase in prices. When federal or local authorities intervene in pricing (combined with negative trends in the economy), a shortage and / or decrease in product quality may occur without a noticeable increase in prices. In this case, they talk about such a thing as hidden or suppressed inflation.
Not every price increase is inflation. For example, seasonal (cyclical) rise in food prices, various price fluctuations, including short-term price hikes, are not considered inflation. They talk about it if prices are rising steadily, and this growth applies to most goods and services.
What is deflation?
In contrast to inflation, a decline in the weighted average price level is called deflation. It is observed much less frequently than inflation, and on a smaller scale. Only very few countries can boast of such a price trend. Among developed countries, deflation is characteristic of Japan.
Varieties of inflation
The following types of inflation are distinguished by the intensity of the process:
- Creeping inflation, at which prices rise by no more than 10 percent per year. Such a phenomenon in the world is considered normal and is observed in many countries. Its appearance is often associated with additional infusions of money supply into financial turnover. This leads to such positive shifts as an acceleration of the payment turnover, an increase in investment activity, an increase in production and a decrease in the credit load on enterprises. The average percentage of inflation in EU countries in recent years ranged from 3 to 3.5%. However, if pricing is not properly regulated, there is a risk of inflation becoming more aggressive.
- Galloping inflation is characterized by annual price increases in the range of 10-50%. This situation is extremely unfavorable for the economy and requires the adoption of restraining measures. A similar level of inflation is often observed in developing countries.
- Hyperinflation - price increases from several tens to tens of thousands of percent per year. It is connected with the excess issue of banknotes by the state. It is characteristic for acute crisis periods.
If inflation persists for a long time, then it is called chronic inflation. If at the same time a simultaneous drop in production occurs, then this type is called stagflation. In the event of a sharp increase in prices, only food products speak of such a form as agflation.
By the nature of the manifestations, open and hidden inflation is distinguished. Open is a continuous visible increase in prices. Suppressed (or hidden) is inflation at which prices do not rise, but there is a shortage of goods in stores. Most often this is due to government intervention. Due to the moderate price, demand for products is growing, which may cause a shortage due to high purchasing power, but at the same time relatively low supply. This situation was observed in the USSR. It is called demand inflation.
Manufacturers can also make tricks and reduce the cost of production of their products, which will affect the deterioration of its quality. At the same time, prices for it may remain unchanged or grow at a slow pace. A similar situation is observed in modern Russia. In the USSR, this was not possible due to tight quality control of goods and the requirements of compliance with GOSTs; therefore, demand inflation developed.
Possible effects of inflation
- Depreciation of cash reserves and securities.
- Decrease in accuracy and deviation from reality of indicators of GDP, profitability, etc.
- The depreciation of the national currency of the state.
How is the inflation rate determined
For indexation of salaries, pensions and social benefits, a coefficient should be taken into account that gives adjustments for inflation. The most common method for determining the value of the inflation coefficient is the consumer price index, which is based on a certain base period. Such indices are published by the Federal State Statistics Service. To determine it, use the value of the consumer basket. But other methods are used, such as:
- Producer price index. Determines the cost of production, excluding taxes.
- The dynamics of the national currency relative to the base, more stable (dollar).
- Living expenses index. Includes income and expense definition.
- GDP deflator. Determines the dynamics of prices for a group of the same goods.
Asset price index, which includes stocks, real estate and more. The rise in asset prices is more intense than the rise in prices of consumer goods. As a result, those who own them become richer.
Anti-inflationary policy
Anti-inflationary policy is a set of measures taken by the federal authorities aimed at regulating price increases. Such a policy is divided into the following types:
- Deflationary policy. It is aimed primarily at reducing the circulating money supply. To do this, use the tax, credit mechanism, reduce government spending. At the same time, a slowdown in economic growth is possible.
- Measures to control both prices and wages, limiting their upper limits. However, this may cause discontent in some sections of society (oligarchs, officials, deputies, etc.).
- Sometimes resort to external loans. Such a policy was carried out in the 90s, which led to a sharp increase in state. debt and economic crisis.
- Measures to compensate for the effects of inflation in the form of annual indexation of salaries and pensions. They are trying to pursue such a policy at present.
- Stimulating the growth of the economy and production is the most complex, but also the most radical method of stabilizing prices.
Inflation in Russia according to Rosstat
According to official data from Rosstat, inflation in 2017 amounted to only 2.5, and according to other sources - 2.7%, which is the lowest in the country's recent history. This level of inflation is quite close to the values typical of developed countries. In 2016, inflation was 5.4%, in 2015 - 12.9%. In 2018, inflation is projected to be 8.7%. Its decrease in the last 2 years could be due to the restoration of world prices for raw materials, the policy of the Central Bank, and, in part, with the policy of import substitution.
Can Rosstat data be considered underestimated?
Most Russian citizens estimate the inflation rate as higher than according to official statistics. According to the inFOMA survey participants, this could be due to several negative factors:
- The decline in real incomes observed from 2014 to 2018. The maximum decline was noted in 2016. True, the scale of this, according to Rosstat, was relatively small: by 0.7 in 2014, by 3.2 in 2015, by 5.9 in 2016 and by 1.4 in 2017. However, these are average numbers. In more vulnerable categories of citizens, of course, it was more. With a decrease in income, a person becomes more sensitive to rising prices.
- The second reason was the increased tax burden in recent years. There are more toll roads, parking lots, fees. Some have suffered more from this, others less. For some groups of citizens, a resort fee can become a negative factor in the holiday season. The depreciation of the ruble also affected. After a long lull, the ruble depreciated greatly. As a result, everything that was sold for dollars rose sharply. This also created a feeling of rapid price increases.
Another reason could be an uneven price increase. They on some goods and services not only did not increase, but even fell during the crisis. But many drugs (especially imported) and products have risen in price quite strongly. As a result, it has become more difficult for people to buy them. It turns out that inflation hit the most significant consumer goods and transport services for the majority of citizens, and this created a feeling of total and strong price increases.
Much also depends on the adopted methodology for calculating inflation.
How did hidden inflation manifest itself?
Rising prices for products and goods is only the visible part of the iceberg, which symbolizes the current situation with inflation in the country. The decline in the quality of goods and services is an important negative trend in recent years. For example, buyers note a decrease in the weight of the same products (bread, milk, etc.), a deterioration in taste, the active use of cheap fats instead of dairy, a greater dilution of products with water, etc. All this indicates a decrease in food the values and health benefits of the same food package in recent years.
Poor quality is characteristic not only of products, but also of many consumer goods. The quality of medical services has also deteriorated. Thus, actual inflation was significantly higher than the nominal price increase, and its true scale is difficult to estimate, and may depend on a specific region.
