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Inflation Rate

The inflation rate is the percentage change in the general price level of goods and services in an economy over a specific period, typically measured annually. It reflects the rate at which purchasing power is eroding due to rising prices. The inflation rate is a key economic indicator used by policymakers, central banks, and investors to gauge the health of an economy and to make decisions about interest rates, wages, and investments.

Example

If the inflation rate for a given year is 2%, it means that prices for goods and services have risen by 2% on average compared to the previous year.

Key points

• Measures the rate at which prices for goods and services rise over time.

• Typically measured annually and expressed as a percentage.

• A key economic indicator used by policymakers and investors.

Quick Answers to Curious Questions

The inflation rate is measured using price indices like the Consumer Price Index (CPI) or Producer Price Index (PPI), which track changes in the cost of goods and services.

A high inflation rate indicates that prices are rising rapidly, reducing purchasing power and potentially leading to economic instability.

Central banks may raise interest rates or implement tighter monetary policies to control inflation and prevent it from spiraling out of control.