Why does inflation rise?

Inflation refers to an increase in overall price levels and can rise for a variety of reasons. Here are the main factors contributing to the rise of inflation:

1.Demand Inflation: Increasing total demand in the economy may result in higher prices for services and goods. For example, low interest rates can lead consumers and businesses to spend more.

2.Cost Inflation: Increases in production costs cause manufacturers to increase their prices. This usually happens with the rise of worker wages, the increase in raw material prices or the rise in energy costs.

3. Money Supply: Increasing the money supply of central banks may stimulate economic growth but may also trigger inflation. More money can increase demand for goods and push prices up.

4. Exchange Rates: Depreciation of local currency increases the cost of imported products. This can lead to a general rise in prices in the domestic market.

5. The fact that people think that there will be inflation in the future may cause them to increase their current spending. This can fuel inflation by leading to an increase in demand.

6. Government Policies: Government policies, such as tax increases or the abolition of subsidies, may affect the prices of goods and services.

7. Social and Political Factors: Incidents such as war, natural disasters or political uncertainty can affect supply and therefore cause prices to rise.

These factors often work in interaction with each other, leading to inflation reaching a certain level. For economic stability, it is important to manage these dynamics well.