What to know about inflation.
What Is Inflation? Inflation reduces the purchasing power of money (purchasing power, the quantity of goods bought by an amount of money). Inflation reduces the purchasing power of money in a growing economy by triggering rising prices of consumer goods and services. `A slow and steady rising of prices caused by an inflation rate of at about 2% is okay. But when the rate rises faster, sometimes to double digits, then it can have a negative impact on personal financial management. For instance, as a consumer, you would be time consuming to compare and determine best prices to get goods and services at a given moment. How is inflation measured? Inflation is measured by using the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCI) tools. The Consumer Price Index tracks prices for individual goods and services which households are buying. The Personal Consumption Expenditures, PCE, tracks changes in prices of consumer goods and services which ...