A country’s inflation rate is a measure of the overall speed at which prices are rising. Inflation is typically measured using indices like the Consumer Price Index (CPI), Retail Prices Index (RPI) or Producer Price Index (PPI). A country’s central bank usually has a goal of keeping its inflation at a low level to help maintain economic stability and people’s purchasing power.
The pace at which prices change can be influenced by a variety of factors, including monetary policy and economic growth. Inflation often affects the middle class, particularly seniors, who are the first to feel the effects of inflation when their money doesn’t go as far. High inflation can also be challenging for families on fixed incomes, such as retirees, who may see their 401(k) balances and savings accounts erode over time. It can also be difficult for homeowners to afford their mortgages if prices rise too quickly, as they would have to pay higher interest rates on their loans.
Inflation is often caused by events that raise production costs or increase demand for goods and services, such as natural disasters, wars or a shortage of raw materials. This type of inflation is known as “demand-pull.” There has been one period of deflation in the United States history, which lasted from 2009 to 2021. This was the result of a global financial crisis, high unemployment, a housing bubble and monetary policy decisions that tightened credit availability and interest rates.
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