Inflation is when the prices of goods and services rise across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services and bills—Tax Foundation, USA.

Inflation, a widespread economic phenomenon, signifies decline in the purchasing power of money, affecting governments, businesses and individuals alike. Its broad consequences make it a central concern for policymakers worldwide. High or persistent inflation directly erodes purchasing power, diminishes investment returns and lowers living standards. This all-encompassing impact underscores the urgency of addressing inflation through effective policy measures.

Policymakers must prioritise strategies to mitigate the adverse effects of inflation on both businesses and individuals. When it persists, inflation poses significant challenges to economic stability and growth. Proactive measures are essential to safeguard against the detrimental effects of inflation on livelihoods and business operations.

In Pakistan, inflation is typically measured through the Consumer Price Index. This index reflects changes in a basket of goods and services commonly consumed by the population. By tracking these changes, authorities can take timely corrective action.

Central banks and governments set inflation targets as a prudent economic measure to maintain price stability and foster economic growth. They ensure that actual price patterns align with the stipulated targets. Monitoring inflation through CPI helps legislators make informed decisions to mitigate its adverse effects on the economy. Adjusting policies in response to CPI fluctuations is the key for preserving purchasing power and sustaining economic stability.

Inflation stems from various drivers, each with distinct underlying causes. Factors, such as increased demand, reduced supply, geopolitical tensions and currency fluctuations can all contribute to inflationary pressures. A familiar challenge is the demand-pull inflation, where aggregate demand surpasses aggregate supply.........

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