Inflation

The rate at which prices rise across the economy over time.

In depth

Measured by indices like CPI (consumer prices) and PPI (producer prices). Most central banks target around 2% inflation. Hyperinflation (50%+ monthly) destroys economies; deflation (negative inflation) discourages spending and investment. Inflation erodes purchasing power and the real value of bonds and cash.

Related terms

CPI (Consumer Price Index)

The most-watched measure of inflation — tracks changes in prices of a basket of consumer goods.

PPI (Producer Price Index)

Measures price changes received by domestic producers — a leading indicator of CPI.

Deflation

A sustained fall in the general price level — the opposite of inflation.

Stagflation

High inflation combined with stagnant economic growth and rising unemployment.

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