What Is Inflation

Inflation exceeding 50% per month. Prices double in days. Examples: Zimbabwe 2008 (79.6 billion percent monthly), Weimar Germany 1923.

Inflation reduces the purchasing power of money in savings accounts, meaning your dollars buy less over time. If savings earn interest below the inflation rate, you lose purchasing power in real terms. Investing in assets that outpace inflation helps protect wealth.

Inflation is rising prices and declining purchasing power, while deflation is falling prices and increasing purchasing power. Though deflation seems beneficial, it often leads to economic stagnation, reduced spending, business failures, and unemployment.

Central banks target 2% inflation because it encourages spending and investment while remaining low enough to avoid instability. This moderate rate discourages excessive cash hoarding, promotes economic growth, and provides a buffer against accidental deflation.