Inflation

Inflation is measured by tracking the cost of a representative basket of goods and services. The consumer price index is the most widely cited measure. Headline inflation includes everything in the basket; core inflation strips out food and energy, whose prices swing sharply for reasons unrelated to the broader economy.

Economists usually distinguish between demand-pull inflation, where spending outpaces what an economy can produce, and cost-push inflation, where the cost of inputs such as energy or wages rises and is passed on. Expectations matter too: if people expect prices to rise, they act in ways that help make it happen.

Most major central banks target a low, stable rate — commonly around 2% — on the reasoning that mild inflation encourages spending and investment while remaining predictable. Deflation, or falling prices, is generally treated as the more dangerous problem, since it encourages people to delay purchases and increases the real burden of debt.

Inflation reshapes markets. It erodes the real value of fixed-income payments, pushes central banks toward higher interest rates, and changes what investors will pay for future earnings. This is why a single inflation release can move currencies, bonds, and equities simultaneously.

TrustFinance News runs an economic calendar covering inflation releases and central bank decisions across major economies.