Home topics news Image credit: Aditya Vyas on Unsplash Economy News Economy U.S. experiences post-pandemic inflation: Will Australia follow? Heidi Heck November 11, 2021 U.S. inflation has hit a three-decade high in October, with consumer prices rising by 0.9 per cent. Inflation has been fuelled by a consumer price surge in food products, petrol and a sluggish global supply chain. The U.S. Consumer Price Index rose by 6.2 per cent in October year on year, the most significant jump since 1990. In 2020 and 2021, central banks worldwide lowered their cash rate to save their nation’s economies from the pandemic. As a result, many experienced inflationary pressure not seen in decades. So the question is, will Australia follow? What causes inflation? Simply put, inflation occurs when there is too much money chasing too few goods. When more money enters the economy, through increased wages, for example, individuals are willing to spend their increased income. As there is now more competition for goods, prices are pushed higher, and inflation occurs. Central banks have some power to control inflation,through the cash rate they set. The cash rate is the rate of interest a central bank charges a commercial bank. When the cash rate is low, commercial banks are encouraged to lower their interest rate; when the cash rate is high, they are encouraged to raise their interest rate. High interest rates not only discourage lending but also capture a larger portion of the borrower’s income. The reverse is true for low interest