Inflation is really important for the economy. It shows us how fast prices for things are going up. Let’s break down why this matters:
Purchasing Power: Inflation means that money doesn’t buy as much over time. For example, if inflation is at 3%, something that costs 103 next year.
Interest Rates: Central banks, like the Federal Reserve (the Fed), change interest rates based on inflation. When inflation is high, interest rates usually go up too. This can make it more expensive to borrow money.
Wages: If people’s wages don’t increase with inflation, they can’t buy as many things. This can lead to less spending, which is not good for the economy.
So, watching inflation helps us see what’s happening with the economy as a whole.
Inflation is really important for the economy. It shows us how fast prices for things are going up. Let’s break down why this matters:
Purchasing Power: Inflation means that money doesn’t buy as much over time. For example, if inflation is at 3%, something that costs 103 next year.
Interest Rates: Central banks, like the Federal Reserve (the Fed), change interest rates based on inflation. When inflation is high, interest rates usually go up too. This can make it more expensive to borrow money.
Wages: If people’s wages don’t increase with inflation, they can’t buy as many things. This can lead to less spending, which is not good for the economy.
So, watching inflation helps us see what’s happening with the economy as a whole.