What does inflation mean?
Inflation most commonly means a continuing increase in the general level of prices in an economy. It may be measured by comparing the cost of a representative basket of goods and services over time, commonly through a price index such as the consumer price index. When wages and other incomes do not rise as quickly as prices, households can afford less, a situation often described as a decline in real purchasing power. Inflation can arise when demand grows faster than supply, when production is disrupted, or when excessive money and credit circulate. The word also has broader literal and figurative meanings: inflating an object means expanding it by introducing air or gas, while inflation can describe the growth of a document, organization, or exaggerated claim. In these broader senses, the term often suggests an undesirable or excessive expansion rather than a neutral increase.
nounInflation is a general increase in prices throughout an economy, usually caused by demand exceeding available supply or by an excessive expansion of the money supply. More broadly, it can mean an increase in the size, amount, or expansion of something.
- A general increase in prices and the overall cost of living within an economy.
- An increase in the money supply or the expansion of credit that contributes to rising prices.
- The action of expanding something, especially by supplying it with air or gas.
- A figurative increase in the size, scale, or importance of something.
"The government introduced new measures to control inflation and reduce the rising cost of living."
"Wage increases failed to keep pace with inflation, so many households felt poorer despite receiving more money."
"The inflation of the balloon was gradual enough that no one noticed it at first."
Plural is uncommon and is used when referring to separate episodes or instances of price inflation.
"The two countries experienced different inflations because their economies and monetary policies differed."
Inflation can make every nominal price rise at once: the number on the price tag goes up even when the product inside the package stays exactly the same.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Where does inflation come from?
Inflation entered English in the early 17th century from Latin inflātiō, a noun formed from inflāre, meaning “to blow into” or “inflate.” The same Latin root appears in flatus, the noun for gas or wind, and in inflāre itself. In the 19th century, the economic sense developed alongside the broader meanings of swelling or expansion, and by the 20th century inflation had become a standard term for a general rise in prices.
Related word forms
How inflation is actually used
In economics, the term usually refers to a broad and continuing rise across many prices rather than an isolated price increase. In general use, it can describe any physical or figurative expansion and may sound somewhat formal outside economic contexts.
Easily confused with inflation
Inflation is a sustained rise in the general price level, whereas deflation is a sustained fall in prices.