The inflation rate measures how quickly prices for goods and services are rising over a specific period, usually a year. It shows how much your purchasing power is decreasing.
In Depth
The inflation rate is a key economic indicator that reflects the percentage increase in the general price level of goods and services in an economy over a period. When inflation is high, your money buys less than it used to, meaning your purchasing power decreases. Central banks often monitor the inflation rate closely to make decisions about interest rates, aiming to keep prices stable and the economy healthy. It impacts everything from the cost of groceries to the price of housing.
Example
If the inflation rate is 3%, an item that cost $100 last year will cost $103 this year, assuming its price increased at the same rate.