Inflation is a critical variable in the economic sector, to the point where it determines the outcome of a great deal of decision-making in this disciplinary area. It is widely known that inflation can have a strong effect on a substantial number of people’s daily activities.
In a nutshell, inflation is the progressive increase in the cost of goods and services. The emphasis here is on a general increase in pricing, not on particular item price increase. Inflationary depreciation of money means that $50 today buys less of the same goods and services than it did previously.
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In March, inflation in the Eurozone exceeded the February 5.9 percent and reached 7.5 percent, the highest level since 1997. Economists today warn of the dangers of stagflation, which might develop if inflation continues to rise as economic growth stagnates or slows. Stagflation, or recession-inflation, is an economic terminology that refers to a state of high inflation, weak economic growth, and chronically high unemployment.
We are always looking for and including expert viewpoints on the topics we write about, and for this one, we'll present the perspective of multinational businessman Dr. Yaşam Ayavefe, founder and chairman of London-based investment firm Milaya Capital Limited. His noteworthy economic understanding was critical in the company's quick expansion and transition into a well-known powerhouse in a range of industries.
According to Dr. Yaşam Ayavefe, a sharp European recession could be on the horizon as a result of the current spike in prices.
“The real purchasing power of the population decreases as a result of inflation. We can say that although prices are constantly increasing, food, electricity and gas must be used regardless of cost. This has an effect on household income and expenditures on other goods and services, which results in financial struggles for businesses” he added. Dr. Ayavefe responded to the question of how we may protect ourselves from inflation's negative effects by stating that when saving or investing, we should always consider the real interest rate, i.e. the real return on an investment. This means that while making a selection, only investments with a return equal to or greater than the predicted inflation rate should be considered.
We'll illustrate what a real interest rate is with a simple example: If an investor can lock in a 7% interest rate for the next year and anticipates a 5% increase in prices, he or she can expect to earn a real interest rate of 2%.
In general, we can observe that inflation in Europe is producing an increasing number of concerns as it has reached an all-time high. We can only hope that the following period of time would bring some relief to the inflation's tightening belt.
Click the below links to view Dr. Yasam Ayavefe’s projects:
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