Inflation

Inflation is the rate at which the general level of prices for goods and services rises over time, eroding purchasing power. It is typically measured as an annual percentage change in a consumer price index or similar basket of goods and services. Central banks and statistical agencies track inflation closely as a key indicator of economic health and monetary policy effectiveness. Moderate inflation is generally considered normal in growing economies, while high or hyperinflation can destabilise markets, reduce consumer confidence and undermine savings. Deflation, or sustained price declines, can also signal economic distress. Common drivers of inflation include increased demand, rising production costs, supply-chain disruptions and expansionary monetary policy. In commodity-dependent economies, fuel and food price shocks often trigger inflationary pressures that ripple through transport, manufacturing and household budgets. Governments and central banks use interest-rate adjustments, reserve requirements and fiscal measures to manage inflation within target ranges. Inflation expectations influence wage negotiations, investment decisions and currency valuations, making the metric central to business planning and policy debate. Historical episodes of runaway inflation have prompted currency reforms and structural adjustment programmes across both developed and emerging markets.