When prices rise faster than wages, falls.
Workers may earn more on paper and still afford less.
Economists call this the gap between and real pay.
Households notice it first in food and fuel.
Those two items take a large share of a low income.
A rise in the rarely keeps up.
Central banks respond by raising .
Borrowing becomes expensive, so people spend less.
Lower is meant to bring prices back down.
The cure, though, can be worse than the illness.
Firms that cannot cut jobs or .
Policy therefore aims at a soft landing rather than a sharp one.
Getting the timing right is largely a matter of judgement.