Did You Know: Inflation Data Helps Forex Market Predictions

Did You Know: Inflation Data Helps Forex Market Predictions

Have you ever asked yourself “Is that inflation?” If you don’t understand, then you’re not alone. This is one of the most popular questions often asked by investors or new forex traders.

Inflation is a price increase or a decline in the value of a currency. In short, inflation is an increase in the cost of goods that humans need to live and enjoy life.

There are two main causes of inflation

Inflation

Inflation occurs because a country has scored too much money or there has been a financial disaster that has caused the value of its currency to fall. The cause of inflation can also occur due to higher transportation costs such as gas, which makes it a little more expensive for retail stores, thus increasing costs for consumers.

Consumers who, in turn, need such as toilet paper, toothpaste, jeans, paper, cars, lights, furniture. At this point, consumers will usually demand a raise in their companies, which will depress the company’s profits further, which can cause additional price increases, and the cycle will begin and this is the momentum when economists say that inflation has become “embedded” in economy.

There are two causes that make the inflation rate high. If you also might read, What is the Effect of Inflation? then you need a way to understand how inflation can be contracted (or in very rare cases, help your wallet).

Now you know the answer to the question, “Is that Inflation?”

How do you measure the inflation rate?

The most popular inflation index is the consumer price index, which is a basket of goods such as coffee, clothing, etc. in the United States which usually has a much lower inflation rate than the rest of the world, in the range of 3% to 4% per year for the past few decades.

Another option to protect your investment from inflation is to buy bonds. This bond is guaranteed by the United States government with an interest rate based on a combination of a fixed interest rate and an inflation rate that changes because prices always move up or down.

CPI and PPI

Consumer Price Index (CPI) is an indicator that measures the level of increase in goods and services imposed on consumers.

Product Price Index (PPI) is an indicator that measures the level of increase in goods and services imposed on producers.

 

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