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Por que a inflação está subindo tão rápido e aqui está o que precisa acontecer para derrubá-la

INFLATION is now at 10.1 per cent and rising, causing bills and prices to soar.

Business expert Ashley Armstrong explains why inflation is rising so fast and what needs to happen to bring it down.

Inflation has hit a high resulting in prices and bills going up

Inflation has hit a high resulting in prices and bills going upCrédito: Getty
Business expert Ashley Armstrong explains why inflation is rising so fast and what needs to happen to bring it down

Business expert Ashley Armstrong explains why inflation is rising so fast and what needs to happen to bring it downCrédito: News Group Newspapers Ltd.

What is inflation?: It measures how much the price of goods, from food to fridges, and services, such as haircuts and train tickets, have increased over time.

The Office for National Statistics tracks a shopping basket of 700 commonly bought items and works out how much they have risen or fallen from the previous month and compared to what they cost a year ago.

Why are prices going up?: It has been called a “perfect storm” because prices are rising on pretty much everything.

O pandemia shut down factories around the world, leading to supply chain snags which pushed up the cost of shipping goods.

There is also a shortage of workers, leading to companies increasing wages to attract staff.

These higher costs are then passed on to the consumer.

But the biggest driver of inflation has been the war in Ukraine.

Rússia has weaponised its dominance in oil and gas and sent energy prices soaring, which feeds into higher bills.

What can be done about it? Consumers are switching to cheaper own-brand food and cutting TV subscription services.

The Bank of England is meant to keep inflation rates at two per cent for a stable economy.

It has been criticised for being too slow in raising interest rates.

Higher interest rates are meant to put people off spending and borrowing more, which slows down the economy and then lowers the rate of price increases.

I keep hearing about “stagflation”. What’s that?: This is the biggest concern for the Bank of England.

It is when the economy slows because spending and investment seizes up but prices keep rising.

Experts say our problem is there aren’t enough houses or goods or people, not enough supply for the demand, which is keeping prices high.

Steep energy costs will be determined by the length of Russia’s war with Ukraine but also if the government wakes up to the crisis and intervenes to support households and businesses afford soaring bills.

If energy costs are lowered, the rate of inflation won’t be as high, although there is the risk that it would last longer.

When will prices go back down?: The bank wants to get inflation back down to two per cent so it will have to be even punchier about raising rates.

Economists reckon there will be another 0.5 per cent rise next month, which would take interest rates to 2.25 por cento, – and that we could see interest rates of up to four per cent next year.

If the Bank is right, we are in for 15 months of recession, which will mean tightening our belts then companies should cut prices to encourage spending.