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FX.co ★ How to slow down inflation?

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Forex Analysis:::2022-03-23T10:57:19

How to slow down inflation?

The world is facing high inflation, slowing economic growth, and a shortage of goods. According to Almonty Industries CEO Lewis Black, if the Federal Reserve fails to get the situation under control, it could take years to resolve these problems.

The geopolitical tense situation in Ukraine directly contributes to the latest surge in inflation. But it is important to remember that many goods were already close to record high prices even before the current situation in Ukraine.

The number one solution, for the time being, would be to limit the money supply and raise interest rates, the former looking less likely despite the Fed's more aggressive policy. If inflation gets out of control, it could drag on for a decade. It is extremely important now to stop spending money and reduce the amount of money supply.

The U.S. central bank has already made great efforts to slow down inflation. This is very important because, if monetary policy is not changed, it will take years to put the genie back in the bottle, so to speak.

In addition, in the near future, the shortage of raw materials may reduce inflation by limiting consumption.

For example, if consumers cannot purchase a certain product, this unwittingly restricts the flow of money. Accordingly, this can stabilize or at least significantly slow down the inflation rate.

For example, serious risks are associated with the supply of neon gas, which is used in the production of semiconductors and is mainly produced in Ukraine and Russia. And under the current conditions, supplies will be limited.

Supply shortages will cause consumers to pay more for affordable items, but inflation will eventually slow down with significant disruption. This will soften inflation a bit, but this year is likely to be quite difficult.

With all these developments comes the inevitable — a slowdown in economic growth. But these factors will help slow down inflation, especially in 2023.

Analyst InstaForex
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