Inflation is commonly defined as a phenomenon of currency in which the price of goods and
services rise in the economy over a period which indicates lower purchase power of the
currency. The growth of the economy also slows down as inflation occurs. The inflation
occurs in February 2021 in the area of the UK and the US. The marked inflation rates of Euro
0.9 per cent, UK 0.9 per cent and the US 1.7 per cent the rates are lower than the inflation
target of 2 % set by the central bank.
Improvements in technology lead to cheaper prices of equipment; phenomenon of sharing
economy was seen in Uber, Rent the Runway and Airbnb, which reduced investment with the
decline in the working age of the population. Unemployment rates also continued to fall in
February and stood at 5.8% in the US in May, and 4.7% in the UK in April. Inflation
continue to increase the reason was hit pandemic but when the third wave come the policy
was made and does not bind back with a third wave.
The growth of the economy also declines as the low rate of inflation. As people were
spending less amount of money so the firms also raise the price at a lesser rate. The gross
domestic product also declined. In the first quarter of 2021, the Euro Area has a fall of 0.6%
and the GDP in the first quarter of 2021 increased by 6.4% a path towards a slightly high rate
of inflation in the US as compared to the Euro area and the UK
Further, the inflation rate increases in the rest of the year the hope for recovery and growth in
the economy as a huge number of persons gets vaccinated. It was seen in the Euro area the
inflation rate jumped from 0.9% in February to 1.3% in the month of march and 1.6% in
April. England bank reduces the rates to 0.1% and other banks are also supported like the
central bank lowering the interest rate.
Borrowings become cheap to increase spending and investment in the economy. Loans for
business were available easily by lowering the interest rate and also by the means of merging
the government banks with the private banks of England. By lowering the interest rate as the
money cycle in England becomes quicker and more flexible as it helps in supporting the
economy. Continuous support in the economies which are largely expected to put the growth
of the inflation rate low and the rise in the economy.