The Investment Series: Economic Recovery & Inflation

Image Source: Financial Times

WHAT IS INFLATION?

According to Investopedia, inflation is the rate at which the purchasing power* of a currency falls and consequently the general level of prices for goods and services is rising. Put simply, it is the rate at which prices for goods and services in an economy increase over time.

Image Source: Melissa Ling © Investopedia, 2019

POST-PANDEMIC INFLATION

The US Treasury Secretary recently disclosed to City A.M. that “inflation could reach as high as three percent this year as the economy rebounds from the worst of the pandemic”. Similarly, a source from The Bank of England advised the tabloid that “inflation is heading above its two percent target in the UK and will hit 2.5 percent at the end of 2021”.

Image Source: Julie Bang © Investopedia 2019

THE BOTTOM LINE

Overall, inflation is going to be a prominent transitory feature on the road to recovery. I am convinced that this is to be expected and, ideally, should not present any major long term problems. Markets Editor at the Financial Times, Katie Martin said, “it would seem that the markets have also taken this view.” So, if the markets aren’t yet in a state of inflation led panic, neither should we — at least for now!

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Economist 💰| Law student ⚖️ | Amateur stock investor 📈