What does overinflation mean?
Overinflation is a noun for inflation that has become excessive or potentially destabilizing. It usually refers to an unusually rapid rise in the general price level, caused by factors such as excessive consumer demand, rapid money-supply growth, production shortages, or speculative activity. Although the precise threshold between ordinary inflation and overinflation is debatable, the term is used when price increases are judged to threaten economic stability or the purchasing power of money. It can also be applied more broadly to credit, housing, or asset markets that expand beyond sustainable levels. In public discussion, overinflation carries an alarmist but broadly accurate connotation: unlike ordinary inflation, which may be treated as a routine feature of a growing economy, it suggests that economic pressures have become unusually severe or poorly managed. Related terms include disinflation, which means a slowing rate of inflation, and hyperinflation, which denotes a more extreme form of runaway price growth.
nounExcessive inflation, especially an unstable or unusually rapid increase in the general price level that erodes the purchasing power of money. The term may also describe the excessive expansion of prices, demand, or another economic quantity.
- The condition of prices increasing excessively, usually as a result of demand or money supply outpacing the growth of goods and services.
- The excessive expansion or increase of an economic quantity, such as demand, credit, or asset prices.
"The central bank raised interest rates to prevent excessive demand from causing overinflation."
"War-related shortages contributed to overinflation and sharply reduced household purchasing power."
"The regulator warned that speculative lending could lead to overinflation in the housing market."
Plural is uncommon because the word is normally used in the singular for a condition or economic phenomenon.
"Central banks have repeatedly revised their policies in response to overinflations and financial imbalances."
Overinflation is the economic warning that the price spiral has gone from inconvenience to crisis.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Where does overinflation come from?
Overinflation combines the prefix over-, meaning excessive or too much, with inflation. Inflation derives from Latin inflare, meaning “to blow into,” and entered English in the 19th century for the expansion of a currency or monetary system and later for a general increase in prices. The compound overinflation developed in the 20th century as economists needed a term for inflation considered excessive or dangerous.
Related word forms
How overinflation is actually used
The term is most common in economic and financial discussion. It is broader than hyperinflation, which normally describes a more extreme, often runaway, inflationary episode.
Easily confused with overinflation
Overinflation broadly means excessive inflation, whereas hyperinflation usually denotes a particularly extreme and rapidly accelerating loss of currency value.
Overinflation is a situation in which prices are rising excessively, while disinflation is a slowing in the rate of inflation that may still accompany rising prices.