Financial Insights Compass 2023: The Impact of Inflation on Financial Markets​

Inflation refers to the devaluation of money, which leads to increased living costs as prices go up. It is commonly assessed through price indices like the Consumer Price Index (CPI) or the Producer Price Index (PPI), which track the price changes of a set of goods and services and provide insights into the overall inflation rate.

Inflation can arise from various factors, including demand-pull and cost-push influences. Demand-pull inflation occurs when aggregate demand surpasses supply, driving up prices. On the other hand, cost-push inflation originates from increasing production costs, such as wages or raw materials, resulting in higher prices. Inflation can also be categorized based on its severity, ranging from mild or moderate inflation to hyperinflation.

Inflation has different impacts on individuals and businesses. For individuals, it diminishes their purchasing power, making it harder to afford goods and services. It can also affect income distribution, as certain groups may be more susceptible to inflationary pressures. Businesses encounter challenges related to rising production costs, which affect profit margins. Furthermore, inflation introduces uncertainty into investment decisions and may necessitate pricing adjustments to stay competitive.

In the past two years, inflation has come back on our agenda after having a long period of relative price stability in most of the world. There are various causes for the price elevation, such as the Russia-Ukraine war and supply shortages, and there are countries where inflation is mostly caused by a demand-pull while in other countries rising energy prices led to prices skyrocketing. In this context, we decided to publish the Financial Insight Compass about the Impact of Inflation on Financial Markets. It includes 5 main contents: Inflation - One of the current biggest challenges of the global economy, The crucial macroeconomic factors imposed by inflation, Inflation hits the banking industry in multiple aspects, Digital Assets: A secure and inflation-resistant store of wealth?.

The impact of Inflation on Financial Markets​

• Inflation - One of the current biggest challenges of the global economy
• The crucial macroeconomic factors imposed by inflation
• Inflation hits the banking industry in multiple aspects