What is Inflation?

Inflation measures how much more expensive a broad basket of goods and services has become over a specific period, usually a year. As prices rise, each unit of currency buys fewer goods and services, meaning your money's purchasing power declines. In the US, inflation is primarily tracked by the Consumer Price Index (CPI), published by the Bureau of Labor Statistics.

Moderate inflation is a normal part of a growing economy, but high or hyperinflation can be destructive. It can erode the value of savings, create uncertainty for businesses, and force central banks to raise interest rates to cool down the economy. Investors often seek assets like stocks or real estate as potential hedges against inflation over the long term.