What is Headline Inflation ?

Headline inflation is the overall rate of inflation in an economy, including the prices of all goods and services. It’s calculated using the Consumer Price Index (CPI), which measures the average change in prices over time of a fixed basket of goods and services consumed by households.

Other Types of Inflation

1. Core Inflation: This excludes volatile food and energy prices from the calculation. It provides a more accurate picture of underlying inflationary trends.
2. Demand-Pull Inflation: Occurs when aggregate demand exceeds aggregate supply, leading to price increases.
3. Cost-Push Inflation: Happens when production costs rise due to factors like higher wages or raw material prices, which businesses pass on to consumers.
4. Built-in Inflation: Also known as inflationary expectations, it occurs when people anticipate future price increases and demand higher wages or prices for their goods.
5. Hyperinflation: An extremely rapid increase in prices, often leading to economic collapse.
6. Deflation: A decrease in the general price level of goods and services.
7. Stagflation: A combination of inflation and economic stagnation.

Importance of Understanding Inflation Types

Different types of inflation require different policy responses. For example, central banks often target core inflation to make monetary policy decisions, as it excludes the volatile components of food and energy prices. Understanding these distinctions helps policymakers and individuals make informed decisions about economic policies and personal finances.