Inflation rate

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Inflation Rate

A measure of how fast a currency loses its value. That is, the inflation rate measures how fast prices for goods and services rise over time, or how much less one unit of currency buys now compared to one unit of currency at a given time in the past. The inflation rate may increase due to massive printing of money, which increases supply in the economy and thus reduces demand. Equally, it may occur because certain important commodities become rarer and thus more expensive. Central banks attempt to control the inflation rate by increasing and decreasing the money supply. The inflation rate is important to fixed-income securities, as the returns on these securities may not keep up with inflation, and thus result in a net loss for the investor. See also: CPI, Deflation.
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Inflation rate.

The inflation rate is a measure of changing prices, typically calculated on a month-to-month and year-to-year basis and expressed as a percentage.

For example, each month the Bureau of Labor Statistics calculates the inflation rate that affects average urban US consumers, based on the prices for about 80,000 widely used goods and services. That figure is reported as the Consumer Price Index (CPI).

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
In a study carried out by Cheung and Yuen (2002) fundamental interaction of prices and rates of inflation in the United States Singapore and Hong Kong were studied.
H1: There is Co-Integration between the rates of inflation of North Asia H2: There is Co-Integration between the rates of inflation of South Asia H3: There is Co-Integration between the rates of inflation of Middle East H4: There is Co-Integration between the rates of inflation of Africa
H6: There is Co-Integration between the rates of inflation of North America H7: There is Co-Integration between the rates of inflation of South America H8: There is Co-Integration between the rates of inflation of Central America H9: There is Co-Integration between the rates of inflation of Australia
Third, on the economic front, high rates of inflation can jeopardize growth by deterring productive investment, distorting market incentives, encouraging wage hikes and disrupting activity through strikes or more serious political unrest.
Section 2 summarises the empirical literature on the relationship between inflation and economic growth, particularly at low rates of inflation. Section 3 discusses the costs of inflation, and some of the possible counterbalancing benefits of low positive rates of inflation in the presence of nominal rigidities.
This literature can be broadly divided into two groups; the earlier studies which assumed that the relationship between inflation and growth is the same at all rates of inflation (ie linear); and the more recent literature which allows for the relationship between inflation and growth to be different at different rates of inflation (nonlinear).
With no change in the expected real rate of interest, the measured rate of inflation is more likely to be an unbiased estimate of the true rate of inflation even though measured rates of inflation principally measure changes in the p rices of short-lived goods, and largely exclude the prices of long-lived assets.
Were the Higher, Average, Second Sub-sample Interest Rates Wholly Traceable to Higher Average Rates of Inflation as Found by S&S in the U.S.
To be both rational and efficient, expectations about future rates of inflation need to fully reflect all currently available and relevant information.(6) If rational, the observed rate of inflation will differ from the expected rate of inflation only by some random error and the expected rate will be an unbiased estimate of the observed rate of inflation.
The tax-free expected rates of inflation from the Michigan survey for one year ahead may be used to compute the expected one-year real rate of interest by subtracting it from the observed market rate for the period.
Unlike other rates of inflation, zero inflation is a policy goal that will be understood by everyone.
It has strived to balance desirable economic conditions such as full employment, economic growth, and low long-term interest rates with low rates of inflation. But the major drawback to this approach is its feasibility.