Inflation is an increase in the price of selected goods over a period of time. This will make one unit of currency buy a product or service for a lesser price than what it did in the previous years. So this reduces the value of one unit of currency. There can be many reasons for inflation. Usually, the central bank of that particular nation makes sure that the economy of the region runs smoothly and the inflation is in the acceptable limits.sss
There are two main factors that cause inflation. One is the demand-pull and the other is the cost-push. When there is a good demand for a particular product, it makes manufacturers increase the price of the products. This causes inflation. And the other factor is the cost-push, if there is an increase in the consumer products and services, it drives up the prices of the end product automatically.
For the past three decades, i.e. 1990-2019, the inflation rate in the UAE had an average of 2.12%. The highest rate was recorded in December 2008 which was 12.30% and the lowest rate in February 2019 it was -2.50%. In the year 2018, the inflation rate was around 3.53% wherein 2017 it was recorded at 1.97%. In 2019, there was a drop which caused deflation. A negative inflation rate i.e. if the inflation rate falls below 0% then it causes deflation.
As said earlier, inflation is nothing but an increase in the price of the commodities. When there is a rise in the prices of the products and services, it can get difficult for an individual to bear the increased costs. To overcome the sudden increase in the prices there is proper financial planning required.
- Investing in mutual funds
- Investing in bonds or fixed income certificates
- Investment on commodities
- Getting loans on lower interest rates
The inflation calculator works in a very simple way.
- Enter the current price of a product
- Give the inflation rate
- Give the number of years i.e. the year you want to find out the product price
Inflation Rate - Inflation rate can be forecasted by taking several factors into consideration and forecasting the right value is not possible. No one can get an accurate prediction of inflation. You can predict is the approximate value by taking 2-3 decades inflation rate and predict a rough value. This helps in preparing yourself financially for inflation.