Inflation

[Pending]

I've been playing this game for the while and for the life of me I can't find an effective way to control inflation. I need to raise interest rates to 40-70% just to make it go down at all and when I lower interest rates, it rises faily steadily and can't be stopped unless I again. Do I have to keep jumping between extreme interest rates to keep interest reasonable? Is there a different tactic for keeping it under control and does it depend on the country/where you're putting your money?

I've looked around and some suggested just ignoring inflation because it caps at around 9.5% for developed countries and while that does seem to be the case, I'm wondering if it's having a significantly adverse impact on the economy.

[RickCall12]

Inflation defines the general price of your countries goods and services. If inflation rises, your prices increase.

It'll only affect the economy if your people cannot afford to buy these goods or services, and would mean they may suffer or die from the lack of goods or services they do need (food).

The best way to make sure inflation does not affect your people is to go full Government Controlled Market, this ensures that everything is basically free meaning everyone can have it.

[Pending]

Would switching to Government Controlled have a negative impact on resource production growth?

[Ricoks]

You shouldn't go for extreme interest rate. Just increase it by a few percent, it will cause inflation to either drop or rise slower, then you can adjust the rate again, don't make too drastic changes in interest rate, it just hurts your growth in the short-term to have it at huge numbers. Inflation is natural. When you lower your inflation to a low number through interest rate, feel free to drop the rate again and let the inflation rise in the meantime, you can then fight it later after allowing more growth for your economy.

[Pending]

"Just increase it by a few percent, it will cause inflation to either drop or rise slower, then you can adjust the rate again,"

This is what I've read elsewhere and it's in conflict with my experience, which leads me to wonder if I'm doing something fundamentally wrong. When I started playing my interest rate was around 2% and inflation was under 1%, so I lowered my interest rate to 1.5%. Then it started to steadily rise, so I gradually increased my interest rate, but even at 15% and then 30%, it was still rising slowly, but seemingly without stop. With that in mind, I don't see the benefit in non-dramatic interest rates because they don't seem to lower or stop inflation.

Even with interest rates around 40% I couldn't get inflation below 3% (inflation at 3% is fine, except to say that I knew that the second I took interest rates down, inflation would skyrocket again so to keep inflation at that level would have meant keeping interest rates crippling high).

Is there another variable outside of interest rates that impacts inflation because maybe that's where my problem lies?

[Ricoks]

Originally posted by Terakai:

"Just increase it by a few percent, it will cause inflation to either drop or rise slower, then you can adjust the rate again,"

This is what I've read elsewhere and it's in conflict with my experience, which leads me to wonder if I'm doing something fundamentally wrong. When I started playing my interest rate was around 2% and inflation was under 1%, so I lowered my interest rate to 1.5%. Then it started to steadily rise, so I gradually increased my interest rate, but even at 15% and then 30%, it was still rising slowly, but seemingly without stop. With that in mind, I don't see the benefit in non-dramatic interest rates because they don't seem to lower or stop inflation.

Even with interest rates around 40% I couldn't get inflation below 3% (inflation at 3% is fine, except to say that I knew that the second I took interest rates down, inflation would skyrocket again so to keep inflation at that level would have meant keeping interest rates crippling high).

Is there another variable outside of interest rates that impacts inflation because maybe that's where my problem lies?

Not sure how you're having such trouble, but definitely don't bring it above 5%. Too high of an interest rate slows down economic growth & hurts your economic health rating, not worth it. I've personally noticed inflation EVENTUALLY drop at higher rates (ex. 3-4%).

[Pending]

I'm still running into problems. I tried creating a new game as Chad and inflation starts really low and eventually creeps upwards. I had interest rates at 35% at one point and that still only got inflation to 4%. When I lowered my interest rates to 5%, inflation went above 7%.

Is high inflation an issue primarily with developing countries?

[Ricoks]

Yes, a side effect of a growing, proper economy is inflation. Don't bring your interest rate above 5%, around 1-3% is okay. Any higher is just crippling your growth, as said many times before by myself. Inflation is not that big of a deal in smaller numbers and it never really gets to 10% or above, keeping your growth at an optimal level is more important.

With developed countries your inflation usually floats around 8%-9% even with no interest rate. While that is rather high, a small rate keeps the inflation to more reasonable levels, but, as I already said, the rates you're putting are very, very high and VERY counterproductive. Reducing the small inflation percentage is not worth the damage you're doing to your economy (ex. just like raising sector taxes to 50% is not worth the temporary cash boost you're going to get, because in long-term it stops your growth and prevents you from getting all the money that the growth could have brought you).

[Pending]

Yeah, I think I'm beginning to grasp how to handle it and after experimenting with lower interest rates, I get why keeping interest rates as high as I had them was problematic. Inflation is still high, but now that I've moved the interest rates to a more reasonable level, Chad's GDP is skyrocketing.

Thank you for your help.