A general increase in the prices of goods and services over time, which means your money buys less than it used to. When inflation happens, a dollar today is worth more than a dollar next year. Central banks and governments often try to keep inflation at a moderate, steady level. High inflation can hurt savers and people on fixed incomes.
If a coffee costs $3 today and inflation is 3% per year, that same coffee might cost about $3.09 a year from now. If you have $1,000 in savings earning no interest, it will feel like it's worth less because you can buy fewer things with it next year.
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