Greetings.
I have recently saw a title for the article named “RBC CEO sees inflationary pressure building as economy bounces back”.
What does inflationary pressure means?
Thanks in advance.
In: Economics
Inflation is when prices rise, forcing companies to increase wages. These can reduce companies’ profits if they have to pay more for goods/materials and labor but can’t raise prices to compensate for the full impact, or face reduced sales by doing so.
Say it costs Starbucks $2 in per-unit costs for the coffee beans, cup, milk, sugar and labor to make the drink they sell for $4. Now, those costs rise to $2.50. Starbucks can see their margin fall to $1.50/unit or they can raise prices to $4.50 but risk reducing sales with higher prices. Either way, it can hurt their bottom line.
An inflationary pressure is anything causes the buying power of money to drop, in other words prices are going up.
If gas cost $1/gallon last night and costs $2/gallon tomorrow, that’s an example of inflation. The various reasons why gas costs more are the inflationary pressures.
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