A major concern for all in the current scenario is the rising inflation. No segment of society has been spared by the impact of inflation and is making an adverse effect on the spending, saving and investments of an individual.
Inflation?
It is considered as just another familiar term where in a general rise in the price level of goods and services create a major impact on the monies spent by an individual. Overall, this phenomenon reduces the worth of your money.
Inflation is measured regularly using the wholesale price index (WPI).
So, if the inflation rate is quoted at 10%, this means that the general level of prices of goods and services has increased by 10% over the previous period. This means that overall the goods you purchased earlier will be available at a cost of 10% higher currently. Mentioned below are a few points which conclude that purchasing the same amount of goods would now cost you 10% more:
• Loose monetary policy of the government
• Increases in production costs
• Tax rises
• Decline in exchange rates
• Decreases in the availability of limited resources such as food or oil
• War or other events causing instability in the economy
Sources reveal that, for the month ending January 2011 food inflation stood at 15.56% compared to 13.55% in December 2010. This high inflationary rate could be attributed primarily to rising vegetable prices.
Onions in particular face exorbitant costs. The primary articles inflation, stood at 17.03%. There has been a sharp rise in prices of essential commodities such as fruits, vegetables, milk, eggs, meat and fish, which carry 10% weightage on the WPI.
Value your hard earned money, and manage your finances with the increasing inflation too. Mentioned below are a few pointers which would help you to protect yourself from the rising inflation and handle the impact:
• Avoid keeping your money stagnant. Invest your money, to increase its worth.
• Try choosing investments which earn you a rate of return, higher that the inflation rate, to avoid negative real returns.
• Inflation influences market sentiments. So if you are an equity investor, stay cautious, and keep a watch for negative market reactions.
• With rising inflation, debt instruments may not be an attractive investment option. The real interest rate i.e. interest rate after adjusting inflation may be low or negative. Modify your investment strategy in order to cope with inflation. Commodities such as gold and stocks are considered a good hedge against inflation.
• Wait for interest rates to go up before locking your money into long term fixed deposits.
Most of us are affected by inflation, but some or the way all of us can figure a solution to keep ourselves tension free and asking the government to help us with a range of policies which would be worthwhile for the time to keep inflation at bay:
Appropriate measures to reduce inflation are taken by the Reserve Bank of India and the monetary authorities regularly. Some of the measures are as follows.
• Reducing the central bank interest rates and increasing bank interest rates.
• Regulating fixed exchange rates of the domestic currency.
• Regulatory control on process and wages.
• By tightening the monetary policy, the rising inflation in the economy could be partially controlled
Source: http://www.rediff.com
Inflation?
It is considered as just another familiar term where in a general rise in the price level of goods and services create a major impact on the monies spent by an individual. Overall, this phenomenon reduces the worth of your money.
Inflation is measured regularly using the wholesale price index (WPI).
So, if the inflation rate is quoted at 10%, this means that the general level of prices of goods and services has increased by 10% over the previous period. This means that overall the goods you purchased earlier will be available at a cost of 10% higher currently. Mentioned below are a few points which conclude that purchasing the same amount of goods would now cost you 10% more:
• Loose monetary policy of the government
• Increases in production costs
• Tax rises
• Decline in exchange rates
• Decreases in the availability of limited resources such as food or oil
• War or other events causing instability in the economy
Sources reveal that, for the month ending January 2011 food inflation stood at 15.56% compared to 13.55% in December 2010. This high inflationary rate could be attributed primarily to rising vegetable prices.
Onions in particular face exorbitant costs. The primary articles inflation, stood at 17.03%. There has been a sharp rise in prices of essential commodities such as fruits, vegetables, milk, eggs, meat and fish, which carry 10% weightage on the WPI.
Value your hard earned money, and manage your finances with the increasing inflation too. Mentioned below are a few pointers which would help you to protect yourself from the rising inflation and handle the impact:
• Avoid keeping your money stagnant. Invest your money, to increase its worth.
• Try choosing investments which earn you a rate of return, higher that the inflation rate, to avoid negative real returns.
• Inflation influences market sentiments. So if you are an equity investor, stay cautious, and keep a watch for negative market reactions.
• With rising inflation, debt instruments may not be an attractive investment option. The real interest rate i.e. interest rate after adjusting inflation may be low or negative. Modify your investment strategy in order to cope with inflation. Commodities such as gold and stocks are considered a good hedge against inflation.
• Wait for interest rates to go up before locking your money into long term fixed deposits.
Most of us are affected by inflation, but some or the way all of us can figure a solution to keep ourselves tension free and asking the government to help us with a range of policies which would be worthwhile for the time to keep inflation at bay:
Appropriate measures to reduce inflation are taken by the Reserve Bank of India and the monetary authorities regularly. Some of the measures are as follows.
• Reducing the central bank interest rates and increasing bank interest rates.
• Regulating fixed exchange rates of the domestic currency.
• Regulatory control on process and wages.
• By tightening the monetary policy, the rising inflation in the economy could be partially controlled
Source: http://www.rediff.com
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