Definition

Noun: * A self-reinforcing cycle of rising prices and wages: An "inflationary spiral" describes a sustained economic situation where an initial increase in prices leads to demands for higher wages. When wages rise, production costs increase, causing businesses to raise prices again, which then leads to further wage demands. This cycle continues, causing prices and wages to accelerate upwards at an increasing rate, while the purchasing power of currency rapidly deteriorates.

Usage Examples

• Noun:
  • The country entered a dangerous inflationary spiral after the oil price shock.
  • Economists fear that the recent policy could trigger an inflationary spiral.
  • Breaking out of an inflationary spiral often requires difficult monetary measures.

Advanced Usage

• "to trigger/set off an inflationary spiral": to cause such a cycle to begin.
  • The central bank is cautious not to set off an inflationary spiral with its policies.
• "to be caught in/to enter an inflationary spiral": to be experiencing this economic condition.
  • The economy was caught in a severe inflationary spiral throughout the 1970s.
• "to break/escape an inflationary spiral": to end the cycle.
  • High interest rates were used to break the inflationary spiral.

Variants and Related Words

• Inflation (n): A general increase in prices and fall in the purchasing value of money.
  • Inflation is currently above the target rate.
• Deflationary spiral (n): The opposite economic phenomenon, where falling prices lead to reduced wages and demand, causing further price declines.
  • Policymakers are more concerned about recession than a deflationary spiral.
• Wage-price spiral (n): A term often used synonymously with "inflationary spiral," emphasizing the interaction between wages and prices.

Synonyms

• Wage-price spiral: (Near-identical in meaning, focusing on the core mechanism.)
• Hyperinflation: (An extreme, often catastrophic version of an inflationary spiral where prices rise uncontrollably.)
• Runaway inflation: (Descriptive term for inflation that is accelerating and out of control.)

Related Concepts (Not Phrasal Verbs)

• Cost-push inflation: Inflation caused by increases in the cost of production (e.g., wages, raw materials), which is a key driver in an inflationary spiral.
• Demand-pull inflation: Inflation caused by demand exceeding supply, which can be an initial trigger for a spiral.
• Indexation: The automatic adjustment of wages or prices based on a cost-of-living index, which can institutionalize and perpetuate an inflationary spiral.

Noun

1. an episode of inflation in which prices and wages increase at an increasing rate and currency rapidly loses value