Inflation

Understand the idea

Inflation describes an average across a basket of goods and services, not a rise in every price. A lower inflation rate usually means prices rise more slowly, not that prices fall. Different households experience different changes because they buy different things.

An example

If an unchanged basket costs 100 today and 103 a year later, its annual inflation rate is 3%.

Connected ideas

• Possible economic mechanismInterest rates

  Higher policy rates can reduce spending and price pressure, with delays and uncertain effects.

• Related measure or componentConsumer price index

  A consumer price index is one way to measure price changes.

In the news

Petrojam expects steadier fuel supplies, with oil risks still in view

Fed’s September rate increase targets elevated inflation

U.S. July spending edged up, with little gain after inflation