“Cost-push” refers to a type of inflation that is driven by an increase in the costs of production for goods and services. This type of inflation occurs when the costs of inputs, such as raw materials, labor, or energy, rise, leading producers to pass on those increased costs to consumers in the form of higher prices for finished goods and services.

Key points about cost-push inflation include:

1. **Supply-Side Factors:** Cost-push inflation is often associated with supply-side factors. These factors can include increases in the prices of essential inputs like oil or commodities, higher wages, or other production costs.

2. **Reduced Profit Margins:** When production costs increase, businesses may experience reduced profit margins. In response, they may choose to maintain or improve their profitability by raising the prices of the goods and services they offer.

3. **Wage-Price Spiral:** In some cases, an increase in production costs can lead to demands for higher wages by workers to offset the rising cost of living. This can create a wage-price spiral, where higher wages lead to higher production costs, which, in turn, lead to higher prices for goods and services.

4. **External Shocks:** Cost-push inflation can be triggered by external shocks, such as geopolitical events, natural disasters, or supply chain disruptions. These events can disrupt the normal production process and lead to higher costs.

5. **Monetary Policy Response:** Central banks and monetary authorities may respond to cost-push inflation by adjusting interest rates or implementing other monetary policies to control inflation. However, the effectiveness of such measures can depend on the underlying causes of the inflation.

6. **Temporary vs. Persistent:** Cost-push inflation can be temporary if the factors causing the increase in production costs are short-lived or can be addressed quickly. However, if the factors persist, it may lead to a more prolonged period of inflation.

Understanding the distinction between cost-push inflation and demand-pull inflation is important. Demand-pull inflation, the other major type of inflation, occurs when aggregate demand for goods and services exceeds aggregate supply. Both types of inflation can coexist, and their relative contributions can vary over time.

Cost-push inflation can have implications for monetary policy, fiscal policy, and economic stability. Policymakers need to carefully assess the root causes of inflation and implement appropriate measures to address underlying issues.