I thought there would have been a huge impact on currency exchange rate but nothing dramatic seems to happen to now, why is that?
Note: Sorry for unclear title but due to the rule I can’t make the title related to what I want to mention to. And also I couldn’t find any eli5 related to what I’m looking for.
Edit: solved, thanks everyone!
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Inflation only effects the exchange rate if you have high inflation in one country but not the others. Currently every nation is the same boat – everybody has economic impact from COVID, increasing oil prices and reduced international travel.
Also the Federal reserve and it’s equivalents overseas have still been keeping interest rates tightly controlled which is a direct feeder to general inflation.
So what we are seeing at the moment is that we have prices going up in certain sectors while salaries are not, but inflation is measured as a basket of goods but people’s consumption has changed since lockdown – also incomes have been supplemented with government grants. This all paints a very complex picture but basically food prices have gone up, electronics prices have gone up but rents have been frozen (or not gone up as much as they normally would).
Inflation calculations can hide certain increases like for instance the latest iPhone costs more, but less people are buying the latest iPhone.
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