## Inflation: An Economic Phenomenon Investors Must Understand Deeply

**Inflation** is not just a technical term in economics. It is something that affects our wallets every day—rising rice prices, soaring fuel costs, electricity bills increasing—these are all signals that **inflation** is actually happening.

### Simply put, what is **inflation**?

**Inflation** is an economic phenomenon where the prices of goods and services tend to increase continuously. From the perspective of money, it means that the value of money is gradually decreasing. As a result, the money we have in hand can buy fewer items than before.

For example, Mr. A had 50 baht ten years ago. That amount could buy several plates of rice. But today, 50 baht might only be enough for one plate, or maybe not enough at all. This is the power of **inflation** working every day.

### There are several reasons why **inflation** occurs.

**First: Demand exceeds supply**

When people want to buy a lot of goods but the market doesn’t have enough to sell, sellers naturally raise prices. Consumers then have to pay more to get those goods. This situation has become more common after the world recovered from the COVID-19 crisis, as people saved money during lockdowns, and when the economy reopened, everyone rushed to buy (Revenge Spending).

**Second: Production costs rise**

Costs this month are higher than last month—whether it’s oil, gas, labor, or raw materials. Producers must increase prices to maintain profits. This is called Cost Push Inflation.

**Third: The government releases too much money**

When the government prints more money into the economy, the circulating money supply increases. But goods and services do not increase correspondingly. The result is money devalues, and **inflation** follows.

### Current picture: **Inflation** worldwide and complex situations

According to the latest IMF report (January 2567), the global economy is expected to grow at 3.1% in 2567 and 3.2% in 2568, which is higher than previous forecasts. However, risks still lurk.

The global **inflation** rate is decreasing, which is good news, but geopolitical tensions (such as wars) and supply chain constraints remain risks.

For the Thai economy, in January 2567, the (CPI) remained steady at 106.98 compared to the previous year, resulting in a **inflation** rate of 1.11%, the lowest in 35 months. The main reasons are the decrease in energy prices, fresh vegetables, and meat.

### Who benefits from **inflation**?

**Entrepreneurs and small business owners** benefit the most. They can adjust their prices according to market demand quite flexibly. For example, PTT Public Company Limited ((Public)) in the first half of 2565 reported a net profit of 64,419 million baht, a 12.7% increase compared to the previous year, due to rising oil prices.

But what about **employees with fixed salaries**? They are on the opposite side. Although their salaries increase, the raise is often less than the **inflation** rate. Therefore, their purchasing power diminishes.

### How is **inflation** different from deflation?

**Deflation** is the opposite of **inflation**. It occurs when the prices of goods and services decrease continuously. Although it sounds like good news (cheaper goods), in reality, **deflation** is more harmful to the economy because people tend to stop buying, waiting for prices to fall further (. Producers then reduce production and employment, and eventually, the economy stalls.

) Effects of **inflation** on daily life

**Higher living costs reduce purchasing power**

Goods that are always in short supply, such as meat, eggs, and fresh vegetables, see prices increase every year. Fuel prices have skyrocketed from 2565 to 2567. The result is that the money in your wallet buys less than before.

**Price levels ###2564-2567(**
- Red pork: 137.5 baht/kg → 205 baht/kg → 125 baht/kg → 133.31 baht/kg
- Chicken breast: 67.5 baht/kg → 105 baht/kg → 80 baht/kg → 80 baht/kg
- Diesel fuel: 28.29 baht/liter → 34.94 baht/liter → 33.44 baht/liter → 40.24 baht/liter
- Gasohol: 28.75 baht/liter → 37.15 baht/liter → 35.08 baht/liter → 39.15 baht/liter

**Unemployment rate increases**

When sales decline, entrepreneurs must reduce staff, slow production, and cut investments. The result is more unemployment.

**Asset bubbles**

When interest rates are low, investors rush to speculate in high-risk assets such as stocks and real estate. This increases long-term market instability.

) Stagflation: "A Catch-22 Situation"

Sometimes, **inflation** occurs alongside economic stagnation. This is Stagflation—rising prices but no economic growth. People face reduced purchasing power while prices increase. This is a situation nobody wants.

### What should we do? Investment strategies for investors

**1. Save with high-yield ###High-Yield Savings(**

During **inflation**, banks often raise interest rates to attract deposits. Choose fixed deposit accounts with high rates offered by banks. This provides better returns than regular savings accounts.

**2. Invest in benefiting sectors**
- **Bank stocks**: Benefit from rising interest rate spreads
- **Insurance stocks**: High returns from government bond investments
- **Food stocks**: Essential goods with pricing power

**3. Gold: A hedge for your portfolio**

Gold moves in the same direction as **inflation**. The higher the inflation, the higher the gold price. Buying gold or trading CFDs on gold are popular ways to profit in both bullish and bearish markets.

**4. Real estate )Real Estate(**

Rents tend to follow **inflation**. Investing in rental properties creates income that is less volatile than the stock market.

**5. Floating rate bonds / Inflation-linked bonds )Floating Rate Bond / Inflation-Linked Bond(**

These bonds adjust their interest rates according to **inflation**, so your returns are not eroded by **inflation**.

**6. Avoid unnecessary debt )Debt Avoidance(**

During **inflation**, avoid taking out loans that do not generate income, as borrowing costs tend to rise, and you will repay the debt with money that has increased in value.

) Financial planning: 4 key points

**① Keep track of economic news regularly**

Inflation rate ###CPI(, central bank policies—these change constantly. Staying informed helps you prepare and adapt promptly.

**② Plan your spending carefully )Budget Planning(**

Use money wisely—buy only essentials, avoid emotional purchases. Investing is better than hoarding cash.

**③ Avoid FOMO spending**

Don’t rush to buy expensive items. Think carefully—do you really need it or are you just following trends?

**④ Invest in real assets )Real Assets(**

Gold, real estate, inflation-adjusted bonds—these have intrinsic value that is not eroded over time and by **inflation**.

) Summary: **Inflation** is not dangerous if you understand it

**Moderate inflation** ###around 2-3% per year( is good for the economy. It encourages spending, investment, and growth. But when **inflation** spikes too high )Hyper Inflation(, it becomes a problem.

The key is "Understand and adapt." Once you understand how **inflation** works, you can turn it into an opportunity to build wealth—whether through investing in stocks, gold, real estate, or inflation-adjusted bonds.

Smart investors will not let their money be eroded by **inflation** but will make it grow alongside the market’s **inflation**.