Markets & Economy

Inflation

The rate at which prices rise and your money loses purchasing power.

Inflation means each dollar buys a little less over time. It is measured by indexes like the Consumer Price Index (CPI). Mild inflation is normal; high inflation erodes savings and pushes central banks to raise interest rates. It is also why keeping all your money in cash is quietly risky over decades.

For example

At 3% inflation, something that costs $100 today costs about $134 in ten years, so cash that just sits there loses ground.

Related terms

CPI (Consumer Price Index)Interest Rates (The Fed)High-Yield Savings Account

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