Inflation Rate

The inflation rate measures how much prices for goods and services increase over time, typically expressed as a percentage. When the inflation rate rises, each unit of currency buys fewer goods and services, meaning the purchasing power of money decreases. For example, if the inflation rate is 2%, something that costs $100 this year would cost $102 next year. Central banks monitor inflation closely, as moderate inflation is normal in a growing economy, but high inflation can erode savings and reduce living standards. Understanding inflation helps individuals and businesses make informed financial decisions.