Monetary Inflation

Monetary inflation happens when central banks use expansionary monetary policy and increase the money supply in the economy. The extra money is meant to encourage households and businesses to spend more, which raises overall demand. That stronger demand can increase the need for labour and push salaries higher. When supply cannot expand easily, the effect on inflation is usually greater.

If more money is pushed into the economy, people and businesses may spend more. When demand rises faster than supply, prices can go up. That is monetary inflation.