Impact of inflation
Inflation is the rate of change in prices. Rising inflation means you have to pay more for the same goods and services. This can help you in the form of income inflation or asset inflation, such as in housing or stocks, if you own the assets before prices rise, but if your income doesn’t keep pace with inflation, your buying power declines. Over time, inflation increases your cost of living. If the inflation rate is high enough, it hurts the economy.
How Inflation Impacts Your Life
Its Effect on You and the Economy
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Inflation is the rate of change in prices. Rising inflation means you have to pay more for the same goods and services. This can help you in the form of income inflation or asset inflation, such as in housing or stocks, if you own the assets before prices rise, but if your income doesn’t keep pace with inflation, your buying power declines. Over time, inflation increases your cost of living. If the inflation rate is high enough, it hurts the economy.
The effect depends on the type of inflation. For example, walking inflation is 3% to 10% per year. Creeping inflation is milder than walking inflation while running inflation implies a more aggressive rise in prices that could be a precursor to hyperinflation.1
Rising prices may be an indication of an economy growing very fast. People buy more than they need to avoid tomorrow's higher prices fuels demand for goods and services. Suppliers can't keep up. More importantly, neither can wages. As a result, everyday goods and services are priced out of most people's reach.
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