Inflation

What does Inflation mean?

In economic terms inflation is when prices for goods and services rise. The result of inflation is often reduced buying power for consumers, unless their wages are also inflating at the same or a greater rate. Global central banks all have a mandate to keep inflation at a certain level, and will do what they can to prevent inflation from rising too much, or falling too much. Currently the global inflation target is 2% in most developed countries. This is a manageable level that not only allows consumers to adapt more easily to rising prices, it also keeps wage growth in check, and prevents the economy from overheating, leading to an inevitable recession.

You can also use the term inflation is relation to assets, such as real estate or a portfolio of equities. Savvy traders often look for assets that have seen deflation and are just beginning to experience inflation. After a sustained period of inflation they will then sell those assets for a profit. This also applies to cryptocurrency trading, even though many cryptocurrencies have been created with a hard cap on their emission rate and total supply, making the actual coin deflationary.