Inflation 2020

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The chart shows a steady increase in the inflation rates from the late 1950s and the 1970s up to the late 1990s. During this period consumer prices tended to reach a peak. These prices then began a gradual fall to a low point and after reaching a low point to an inflation rate that is now regarded as normal. Inflation rates are still very high in the euro area today, but they are down for the most part. Since the beginning of the crisis they are on a downward trend and the European Central Bank is trying to encourage prices to fall even further. A recent increase in prices and the possibility that they will become much higher than the current level are causing anxiety and concern to investors and the public alike. On average, prices have been increasing by about 2 a year. If this trend continues, by 2020 the price level in the euro area will have increased by 50. This is a very high level and many people do not consider inflation to be a problem when it reaches very high levels. The current inflation rate is defined as the year on year percentage change in the consumer price index, CPI The CPI reflects the price changes from the end of the year of a basket of goods and services. It is calculated by taking all the prices, as recorded by different suppliers and multiplied by the average rate of change. This process is known as measuring inflation, and it is done by taking the percentage change in one month and using it for all the rest of the years. It is the most complete approach to measure whether the prices of goods and services have gone up or down as a result of changes in the amount of money paid for them. The European Central Bank also announced that it would be increasing its rate to 25 from the present level of almost zero. This is because it believes that the European economy will recover and inflation will gradually go back to a low level in the future. The European Central Bank is attempting to encourage prices to fall now because it believes that the rate at which prices are rising is a cause for concern.

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