Most people often hear about inflation but do not really understand what it is and how it affects their daily lives. Inflation is a significant economic indicator and it helps you to understand how the prices of commodities are changing as well as know what direction the country is headed to economically. The inflation rate of the U.S is currently at 2.1% which is not very good compared to last year. It is therefore important to understand the rate of inflation and how it affects you and the people around you.
First and foremost inflation is defined as the increase in the price of goods and services in an economy within a specific period of time. One of the best ways used to determine the rate of inflation is through Consumer Price Index (CPI). This is where the prices of basic commodities such as sugar, gasoline, and movie tickets are tracked over a certain period of time and a report generated out of that. If for example, the report indicates that the CPI is 4% it implies that on average the price of goods and services has gone higher by 4% compared to the previous year.
Inflation can be seen almost everywhere in our daily lives. For example around January 2017 one pound of chicken on average cost $1.42. Later on January the following year, the same chicken was being sold at $1.51. That is an increase of about 6.3%. However, such an increase does not mean that the inflation rate increased by 6.3 percent because the chicken is just a part of the equation.
How inflation affects consumers
An increase in the rate of inflation affects you in various ways. First of all, inflation weakens your purchasing power. When the rate of inflation is high, the standard of living generally goes down as a result of the increase in the price of most commodities. Inflation also increases interest rates charged by banks.
How to shield yourself from high inflation
There are several measures you can take to protect yourself from high inflation. They include diversifying from the dollar and purchasing physical gold.
U.S Money Reserve is one of the largest precious metal dealers in the U.S. The company currently has over 400,000 customers across the country. U.S Money Reserve was founded in 2001 and it is the main distributor of government-issued coins. The company has its headquarters in Austin, Texas.