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IPFS News Link • Economy - Economics USA

Everything You Need to Know About Inflation

• by M. K. Matthews

The Fed usually seeks a 2% inflation as a comfort zone.

Granted, it's only one data point but with unemployment currently low and some signs that economic growth is accelerating, the suggestion exists that overheating/inflation is a risk for the U.S. economy in a way that hasn't existed for about ten years.

What is inflation?

Inflation is when the buying power of a currency declines over time.  If inflation is 2% that translates to a basket of groceries which cost $100 today costing $102 a year from now.

But since prices rise and fall and we each buy different articles how is that tracked?  Government statisticians and economists create indexes to reflect a full range of products and services that are consumed weighted by how much the average household spends on each item.