Investing Basics

What Is Inflation?

Inflation is the general rise in the prices of goods and services over time, which means a unit of currency buys less than before. It is usually expressed as an annual percentage change in a price index, such as the Consumer Price Index (CPI). Many central banks aim for low and stable inflation.

How Inflation Is Measured

Statistics agencies track the prices of a representative basket of goods and services. The inflation rate is the percentage change in that basket's cost over a period, typically a year.

Effect on Money

With 3% annual inflation, something that costs 1,000 today would cost about 1,344 in ten years, and 1,000 kept as cash would buy about 744 worth of today's goods.

Related Concepts

Deflation is a general fall in prices; disinflation is a slowdown in the rate of inflation.

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🎈 Inflation Calculator Future cost and buying power of money for any inflation rate. Calculate → 📈 Compound Interest Calculator See how your money grows with compound interest and regular monthly contributions. Calculate → ⏳ Rule of 72 Calculator A quick shortcut for estimating how fast your money doubles. Calculate →

🔗 Related Terms

Purchasing Power Real Rate of Return Interest Rate Rule of 72 Percentage Change

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.