Why inflation needs to be well understood!

inflation fixed income wallet control

Whenever we hear the inflation figures, we only relate it to the current cost of living. Imagine onions are today INR 80 per kg. On seeing the rising inflation number, we express concern on our current wallet share. However, inflation has much more meaning and analysis in it, than just relating it to anyone’s current living costs. It is giving us the first signals that current situation is tough but times ahead are tougher. Rather than seeing inflation as an obstacle, it should be seen as a stepping stone with a challenge to ensure we lead better financial lives in future.

inflation

Inflation is the key

Inflation can be viewed positively or negatively depending on the individual viewpoint and rate of change. Those with tangible assets, such as property or stocked commodities, may like to see some inflation as that raises the value of their assets. However, people holding cash may not like inflation, as it erodes the value of their cash holdings. Ideally, an optimum level of inflation is required to promote spending to a certain extent instead of saving, thereby nurturing economic growth.

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