Inflation
Financial glossary definition
Definition
The rate at which the general level of prices for goods and services rises over time, eroding purchasing power. The Federal Reserve targets 2% annual inflation. Historical US average is approximately 3%.
Related Terms
Consumer Price Index (CPI)
A measure of the average change in prices paid by consumers for a basket of goods and services. The …
Deflation
A decrease in the general price level of goods and services — the opposite of inflation. While lower…
I-Bond
A US savings bond whose interest rate adjusts every 6 months based on inflation (CPI). I-Bonds provi…
Index Fund
A type of mutual fund or ETF that tracks a market index (like the S&P 500) by holding all or most of…
Interest Rate
The percentage charged by a lender for borrowing money, or the percentage earned on savings and inve…
Nominal Return
The raw percentage return on an investment before adjusting for inflation. A 10% nominal return with…