Fomoflation:
The recent signing of a proclamation by the U.S. President raising the annual fee for H-1B visas to $100,000 a year led to a sudden panic-driven demand that pushed ticket prices higher, illustrating a textbook case of fomoflation.
- Fomoflation occurs when consumer behaviour (demand psychology) and market or supply pressures combine to create rapid inflation even in essentials, where prices rise faster than underlying economic factors would justify.
- The cycle of panic-driven demand and resultant price surges illustrates how fomoflation operates.
- Therefore, it is the fear of ‘scarcity’ or the Fear Of Missing Out (FOMO) which triggers buying frenzy, setting off an ‘artificial demand’ loop and eventual price rises.
- Unlike usual inflation, which is an outcome of macroeconomic factors, fomoflation arises from behavioral psychology, often amplified by social media.
- It can also be seen in consumer goods.
- For example, during festive seasons, demand for staples such as pulses and cooking oil spikes after media reports highlight potential shortages or price hikes.
- Influenced by the reports, consumers rush to stock up, pushing prices higher even when supply is sufficient.
