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What is Inflation?
The rate at which money loses purchasing power. Cash under the mattress loses value every year.
Inflation is the rate at which prices rise and money loses purchasing power. At 3% inflation, $100 buys only about $74 worth of today's goods after ten years.
Inflation is the hidden cost of holding cash. Real assets — stocks, real estate, commodities, gold — have historically protected purchasing power better over long periods, though not in every period.
Central banks fight inflation with higher interest rates, which in turn affects the prices of bonds, stocks and almost every other asset.
Related terms
See Inflation applied to real markets — 30 markets, decades of data — in the Research Terminal.
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