Experts from Liberty Commercial Finance Limited discuss the impact of inflation on the global financial market.

Recently, there has been a significant increase in prices, which is hard not to notice, as you have to pay more for the usual products and your utility bills are not getting any smaller. This is not the first year of this trend and it is becoming more and more noticeable. This is due to inflation, which is described in the article written with the help of experts from libertycommercialfinanceltd.vip.

What is inflation and what are the different types?

The general increase in the prices of services and goods and the depreciation of money and a decrease in its purchasing power is called inflation. It is a stable economic phenomenon resulting from the fact that supply cannot fully satisfy demand. There are the following types of inflation:

• Normal. Price increases are controlled and do not exceed 4% per year. Such an indicator encourages people to invest in the economy, take out loans and pay them back;
• Moderate or creeping. No more than 10% per annum. Risks may increase, but purchasing power is maintained;
• Galloping. There is a significant depreciation of the national currency, which leads to bankruptcy of companies, renegotiation of contracts and other negative consequences;
• Hyperinflation. Prices rise by more than 50% per month. The value of the national currency falls rapidly, people and businesses begin to barter or use other currencies. In this case, the state cannot pay its debts, leading to default and currency reform.

Inflation can also be categorised according to its degree of openness:

• Hidden. It is observed in countries with non-market economies and strict price regulation. In this case, the cost of production rises but there is still a deficit;
• Open. Price increases can be explained by market mechanisms, and the state is not involved in setting prices.

If there is a uniform increase in prices for all groups of goods, then there is balanced inflation.

Experts at Liberty Commercial Finance Limited explain that the phenomenon is characterised by the following features

• The real income of the population falls;
• The general level of prices for services and goods rises;
• Money depreciates (becomes cheaper);
• there is a change in monetary policy.

In addition, the key interest rate of the central bank is raised in order to curb inflation. This forced measure also has a negative impact on consumers, who find it more difficult to repay existing loans and credits as their income does not increase.

Causes of the phenomenon according to Liberty Commercial Finance Limited broker experts

The main triggers for price increases can be the actions of banks and the economic policies of a particular government. This is why inflation occurs:

• Depreciation of the national currency;
• An increase in the price of imported goods;
• Food production crisis;
• Rise in world prices for energy resources;
• an increase in state expenditure for national and social purposes;
• Preponderance of investments in a certain sector;
• Budget deficit.

Significant pressure on the consumer sector is also considered to be one of the reasons.

How does inflation affect global financial markets?

A change in the price level can affect various aspects of the economy and investors' investments. These effects manifest themselves in the following ways:

• The real value of long-term assets falls;
• if inflation is high in a country, the value of the national currency falls, which has a direct impact on exchange rates in the world market;
• Changes in investment decisions. Investors may seek alternatives that retain their value even in times of high inflation (gold, real estate, precious metals);
• Increase in the cost of credit;
• Changes in central bank interest rates;
• lower consumer spending, which has a negative impact on retail trade.

Inflation also creates uncertainty in the financial market. As a result, experts are unable to predict economic conditions for businesses and investors.

What's wrong with high inflation?

Experts at broker Liberty Commercial Finance Limited believe that this will lead to an increase in the price of exchange-traded commodities, which means that the cost of energy resources will increase and tariffs will rise. High inflation can also have a negative impact:

• A decrease in purchasing power, which affects the quality of life of consumers;
• The emergence of social inequalities;
• Deterioration of economic stability. Uncertainty is created, demand falls and exchange rates change;
• confidence in the currency is undermined. High inflation is bad for the national currency. People insure themselves and choose other forms of assets;
• Difficulties for businesses. They find it difficult to plan budgets and set prices, and with the cost of buying raw materials and production, there can be pressure on profits;
• Rising borrowing and lending rates.

Experts at broker Liberty Commercial Finance Limited believe that inflation is a normal economic phenomenon, but high interest rates can have a negative impact on the economic stability of the financial market.

Cryptocurrency currency trading in times of inflation

Digital assets are chosen by investors to protect their capital. It is a kind of alternative store of value that allows you to wait out the negative trend of rising prices. But high inflation can also have a negative impact on the crypto market:

• Increased speculation. In the context of unstable market conditions, many will want to make a quick buck, which could lead to increased interest in digital assets;
• Reduced demand for traditional assets.

The cryptocurrency market is quite volatile and can be influenced by various factors (news, market trends, technological and economic events, changes in exchange rates, etc.). The impact of inflation on the cryptocurrency market is difficult to predict, but according to the experts at broker Liberty Commercial Finance Limited, it is one of the safer assets for now.

Experts at Liberty Commercial Finance Limited warn: "Fraudsters are constantly looking for new ways to lure traders into their networks. Therefore, you need to be extremely careful as there are a lot of dishonest companies in the cryptocurrency trading space. According to Liberty Commercial Finance Limited, feedback from former customers is one of the best sources of information to help you spot fraudsters.