Greedflation

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Greedflation

About:

  • Greedflationsimply means (corporate) greed is fuelling inflation.
  • In other words, instead of the wage-price spiral, it is the profit-price spiral that is in play.
  • In essence, greedflation implies that companies exploited the inflation that people were experiencing by putting up their prices way beyond just covering their increased costs and then used that to maximise their profit margins.
  • That, in turn, further fuelled inflation.

In the developed countries — in Europe and the US — there is a growing consensus that greedflation is the real culprit.

What is inflation — and disinflation, deflation and reflation?

  • Inflation(or the inflation rate) is the rate at which the general price level rises.
  • When it is reported that the inflation rate was 5% in June it implies that the general price level of the economy (as measured by a representative basket of goods and services) was 5% more than what it was in June 2022.
  • Disinflationrefers to the trend when the inflation rate decelerates.
  • Suppose it was 10% in April, 7% in May and 5% in June. This is disinflation.
  • In other words, disinflation refers to a period when even though prices are rising (or inflation is happening), it is happening at a slower rate each passing month.
  • Deflationis the exact opposite of inflation. Imagine if the general prices level in June was 5% lower than what it was in June last year.
  • Reflationtypically follows deflation as policymakers try to pump up economic activity either by government spending more and/or interest rates being reduced.

Syllabus: Prelims

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