Hello and welcome. My name is Alan Robert, and today is April 12th, 2022. Our English vocabulary selection today has to do with inflation. We’ve touched upon inflation in recent previous podcasts when we have looked at the tendency of central banks to raise their policy rates, and the high prices of soft commodities like wheat and canola, due to war in Ukraine and drought in Canada, as well as problems in the global supply chain. If you missed those lessons, I encourage you to go back and listen to them.
Since inflation is shaping up to be one of the big stories of this year as many large and small economies are already feeling the effects of surging prices, I thought we could take a deeper look at some of the technical vocabulary you might need in order to discuss the issue yourself.
Okay. Let’s get started with the vocabulary. Knowing how to use at least a few of these words will help you talk about inflation in English.
CPI: These initials stand for the Consumer Price Index, which is a measure of the average change over time in the prices paid by consumers for a market basket of goods and services.
Hawk: An inflation hawk is someone seen as willing to allow interest rates to rise in order to keep inflation under control.
Inventory: Inventory can refer to raw materials used in a manufacturing process, or it can mean the accumulation of finished goods… also known as stock.
Creeping inflation: This is mild inflation, usually understood to be less than 3% per year. Creeping means that it is increasing, but slowly.
Walking inflation: Inflation between 3% and 10% per year. This level of inflation is considered harmful.
Galloping inflation: a condition when the inflation rate is extraordinarily high. It is perhaps 20%, 50%, or even higher on an annual basis.
Hyperinflation: This is when inflation gets out of control. You might see monthly increases of more than 50%.
Demand-pull Inflation: Demand-pull inflation is the upward pressure on prices that follows a shortage in supply, a condition that economists describe as "too many dollars chasing too few goods.”
Cost-push Inflation: Cost-push inflation (also known as wage-push inflation) occurs when overall prices increase due to increases in the cost of wages and raw materials.
Built-in Inflation: Built-in inflation occurs when workers demand higher wages to keep up with rising living costs. This causes businesses to raise their prices in order to offset their rising wage costs, leading to a loop of wage and price increases. Built-in inflation is sometimes referred to as a “wage-price spiral”.
Pent-up demand: A rapid increase in demand for a service or product after a period of reduced spending which resulted in a backlog of demand.
Okay, listen up. You will hear some, but not all of the vocabulary, used in this short summary:
It’s not quite a global phenomenon, since some countries –particularly in Asia -- are only experiencing creeping inflation this year, but other major economies, like the United States, have entered the harmful range of walking inflation, with inflationary figures higher than they have been in the past 40 years.
This historical spike in inflation has been driven by supply chain disruptions and pent-up consumer demand for goods following the reopening of the economy in 2021. This situation has been complicated by the Russian invasion of Ukraine, which led to a surge in the price of oil and wheat.
Consumers can feel the spike in oil prices at the gas pump, and they feel the soaring wheat prices at the grocery store.
Complicating matters even more, countries are also experiencing cost-push inflation caused by the current high prices of many raw materials, like copper for example.
Most analysts expect central banks to apply hawkish policy measures, which will feature increases in policy rates designed to make credit more expensive and hopefully bring inflation down to its normal range.