I've just noticed that many people still don't really understand what inflation is and why it affects our lives so much.

Let's start with the basics: inflation is a situation where the prices of goods and services continuously rise. From the perspective of money, it means the value of our money decreases, so we need more money to buy the same item. Simply put, things become more expensive.

A clear example: in the past, 50 baht could buy many bowls of rice, but now it only buys one. The prices of pork, chicken, and other meats have changed dramatically over the past 10 years. Red meat used to cost 137 baht per kilogram and has risen to 205 baht in 2022. Chicken breasts also increased similarly. Chili peppers, which used to cost 45 baht per kilogram, now cost around 250 baht. Cooking gas went up from 318 to 423 baht.

Why does this happen? Mainly due to three major reasons: people want to buy more goods but supply isn't enough, production costs have increased due to global oil and commodity prices, or the government has printed more money.

After the pandemic, the economy started to recover. People had savings from the lockdown period and began to spend more in a "revenge spending" manner. Demand increased significantly, but factories couldn't keep up. Supply chain disruptions were severe—shortages of containers and semiconductor chips. Meanwhile, crude oil prices shifted from record lows in 2020 to record highs as countries reopened.

For Thailand, the Consumer Price Index or CPI, which measures inflation, is based on data collected on 430 items each month by the Ministry of Commerce. In January 2024, the CPI was 110.3, up 0.3 percent from the previous year. The overall inflation rate dropped to 1.11 percent, the lowest in 35 months. This was because energy prices decreased due to government measures, and fresh food prices fell as production increased.

Looking at history, Thailand experienced a maximum inflation of 24.3 percent in 1974 due to the Middle East war. In 1980, it was high again because of the Iran-Iraq war. The most severe was in 1998 after the 1997 financial crisis, when the baht depreciated sharply, and inflation surged to 7.89 percent. Recently, in May 2022, inflation exceeded 7.10 percent due to the Russia-Ukraine war.

It's important to understand that moderate inflation is good for the economy. It encourages business expansion, raises product prices, increases profits, creates more jobs, and boosts money circulation. However, if inflation rises too high, the country can enter hyperinflation or money devaluation. This causes prices to become unaffordable, people buy less, businesses can't sell, prices drop, profits shrink, layoffs increase, unemployment rises, and the economy stalls.

Who benefits from inflation? Traders, entrepreneurs, shareholders, bankers—those who can adapt easily. Those at a disadvantage are salaried employees; even if their wages increase, they usually do so at a rate lower than inflation, so their cost of living rises while their purchasing power declines.

When inflation occurs, what should you do? The main options are investing in assets that yield higher returns than deposit interest rates—stocks, mutual funds, real estate, floating-rate bonds, or gold, which tends to rise with inflation. Investing in sectors that benefit from inflation, like banks, insurance, and food companies, can also be advantageous.

The key is to avoid bad debt, plan your spending carefully, and stay informed about economic news. Because inflation affects our daily lives—cost of living, regular expenses, investments, and even retirement planning. The sooner you understand it, the better you can prepare.