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Demand-pull inflation

Demand-pull inflation is a phase of accelerating inflation which arises from a rapid growth in aggregate demand. It occurs when economic growth is too fast. Businesses can take advantage of high demand by raising their profits to widen (increase) profit margins. Typically, demand-pull inflation is associated with an economic boom.

Demand-pull inflation is typically fuelled by rapid economic growth, and it can be difficult to control once it starts to occur. Central banks may use monetary policy, such as raising interest rates, to try to slow down demand and reduce inflationary pressures.

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