Why are prices going up? - 6 Minute English

Hello. This is 6 Minute English from BBC

Learning English. I’m Rob.

And I’m Beth.

In this programme, we’re talking about money -

and Beth, as the old saying goes,

money makes the world go round!

You mean it’s very important and lots of

things couldn’t happen without it.

Well, we all need money – but have you noticed

how our money doesn’t seem to buy

so much these days?

Yes, I have Beth. It seems like consumers

like us are being hit in the pocket

at the moment – and by that, I mean

we have less money to spend.

Now, I’m no economist, but I know this has

a lot to do with inflation - the increase

in prices of things over time.

It’s a big problem globally, and Beth my

question for you is about inflation.

According to one report, what was

the annual inflation rate in Venezuela

between November 2017 and 2018?

Was it: a) 130% b) 1,300%

or c) 1,300,000%?

I’ll say b) 1,300%.

OK. We’ll find out if you’re right later on.

But let’s talk more about

money and inflation now.

Around the world, prices of things are

rising more than normal,

and more worrying is that

prices keep going up.

Two things in particular are increasing

in price – energy, like gas  and electricity, and food.

These are things we need and depend on.

So, what’s causing the rises?

There seem to be two main reasons – the

Covid pandemic and the war in Ukraine,

which has reduced the supply in things we need.

And when things are in short supply – available

in limited quantities - prices go up.

The BBC World Service programme

The Real Story discussed this

in much more detail.

One expert, economist, writer and

broadcaster, Linda Yueh, explained how

price rises could be around for a while…

Even if you take out some of these volatile

items like food and energy, the sustained

price increases we've had, it is actually

getting passed through into how companies

price their goods and services.

and that's where it gets extremely worrying

because that suggests that even if energy

prices, food prices, come down,

we could have inflation now in

the system and I think that

for advanced economies is worrying,

for developing countries, that's

hugely worrying.

Linda Yueh used some interesting

language there.

She talked about food and energy being

volatile items – something that is

volatile is unpredictable

and can change suddenly.

And that’s what we’ve experienced

with food and energy prices.

Yes, and she said these price increases

have been sustained – so, continuing

at the same level for a long period of time.

But Linda Yueh says that even if energy

and food prices eventually

come down, companies will pass on the

extra costs they have already faced by

charging more for their goods and services.

And this could cause inflation –

there’s that word again.

Continuing price rises aren’t good

for anyone but especially for people

in developing economies – countries

which have industry that’s less developed

and have lower living standards.

Another possible consequence of inflation

is recession – this economic

term describes a situation where a

country’s production starts going down,

people’s incomes go down

and unemployment goes up.

This all sounds like a very

bleak economic outlook.

So, what can be done?

Well, that’s the million-dollar question,

and economists are trying to work it out.

Speaking on The Real Story programme,

economist Vicky Pryce gave an overview

of how to control inflation.

One of them, something that is actually

most effective, is by slowing down demand.

And if you increase interest rates, what you

do is you discourage people from borrowing,

whether they are individuals or whether they are businesses - and of course the economy

starts slowing down.

So, she says what is most effective –

meaning what works well and gets the

best results – is slowing down demand.

Increasing interest rates can do this because

people will borrow less money.

Interest rates are fees banks and financial

institutions charge you for borrowing money.

And if we borrow less money, we buy fewer

things, which can reduce inflation.

I think it makes sense now!

And if you were in Venezuela in 2018, you

would really want inflation

to go down, wouldn’t you?

Yes. Now, earlier I asked you what one report

said the inflation rate was there between

November 2017 and 2018.

And I said a very high 1,300%.

Well, it was even higher, Beth.

According to a study by the opposition-controlled

National Assembly, the annual inflation rate

reached 1,300,000% in the 12 months

to November 2018.

This extreme financial situation was

known as hyperinflation.

That’s not good at all.

In this programme, we have been talking about

inflation – that’s the  increase in prices over time.

Other vocabulary we used included the

expression hit in the pocket – which

means you have less money to spend.

Volatile describes something that is

unpredictable and can change suddenly.

Something that is sustained continues at the same level for a long period of time.

And something that is effective works

well and gets the best results.

And interest rates are fees banks and financial

institutions charge you for borrowing money.

Well, we hope you’ve found our brief lesson

about the economy useful.

Thanks for listening. Goodbye for now!

Bye bye!