Financial Terms / I - J / Inflation

Inflation

In simple terms, inflation is the rise in the prices of goods and services in an economy over a period of time. It is usually measured as a factor of the training 12 months data. This calculation means that if someone says that the inflation is at 7%, the average inflation number for the last 12 months is 7%.

If inflation is high, the purchasing power of your money decreases, and the same amount of money can buy fewer goods and services. The U.S. aims to maintain 2% inflation in the economy to boost consumption while not rapidly eroding the purchasing power of its citizens.