Economists usually describe two main types of inflation: demand-pull and cost-push. Demand-pull inflation happens when demand from consumers, businesses, and government for goods and services grows faster than the economy can supply them, so producers raise prices. Rising incomes or lower borrowing costs are common triggers.
Cost-push inflation happens when the cost of producing goods and services rises sharply, or when supply is cut, so producers pass higher costs on as higher prices. Examples include energy or raw-material price spikes from conflicts or embargoes, droughts that reduce farm output, and wage increases not matched by productivity gains. The Cleveland Fed also notes that people’s expectations about future inflation influence how prices actually move.
Source: Federal Reserve Bank of Cleveland: What Causes Inflation?
Image: Fuel price sign in Fort Pierre, South Dakota, Tony Webster, CC BY 2.0, via Wikimedia Commons.