Glossary
Definition
Inflation
A general increase in prices and decrease in purchasing power over time.
Inflation is the rate at which the general level of prices for goods and services rises over time, eroding purchasing power. In the US, inflation is measured primarily by the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) index. Central banks target low, stable inflation (typically around 2%).
Frequently Asked Questions
Is inflation good or bad for billionaires?
It depends on asset type. Owners of real assets (real estate, commodities, companies with pricing power) are often protected against inflation. Holders of cash or fixed-rate bonds see purchasing power eroded. Rapid inflation can trigger interest rate hikes that reduce equity valuations.