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Inflation 101

Here is your guide to understanding inflation. The Center for Inflation Research provides basic definitions and explanations of inflation essentials for you to explore.

What’s inflation?
Learn how it affects the economy and why the Fed cares
Different types of 'flation
Shrinkflation, stagflation, and more concepts that are related to inflation
Infographics on inflation
Answers, with visuals, to questions about inflation

What’s inflation and why do we care?

What is inflation?

Have you ever been shopping and noticed that the prices of a range of things you buy have gone up? If the same things in your shopping basket cost $100 last year and now they cost $105, at a very basic level, that’s “inflation.” More precisely, inflation is defined as ongoing increases in the overall level of prices.

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  • What is inflation?
  • Why do prices change?
  • Is every price increase inflation?
  • How can we tell when inflation is happening?
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Get technical

  • How do you measure inflation?
  • What are price indexes?
  • What is “underlying” inflation and how is it measured?
  • What are deflation, hyperinflation, and stagflation?
  • What is the connection between the Phillips curve and inflation?
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Why should you care about inflation?

What would you do if the money in your wallet or bank account could buy less and less every year? Would you spend more time thinking about how to get the most out of your money while you could? Would you change what you bought or how much? Would you keep money in your savings account? Thinking more broadly, inflation affects everyone in the economy: workers, businesses, people on fixed incomes, lenders, and borrowers.

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  • How does inflation affect the economy?
  • How can inflation be harmful?
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Get technical

  • What are the effects of inflation?
  • What problems do predictable and unpredictable inflation cause?
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Why does the Fed care about inflation?

Some countries have experienced such high inflation rates that their money became worthless. Imagine going to the store with boxes full of money and not being able to buy anything with it because prices have gotten so high! At such high inflation rates, the economy tends to break down. One of the Federal Reserve’s main responsibilities is to keep prices stable.

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  • Why does the Federal Reserve care about keeping prices stable?
  • How does the Federal Reserve try to control inflation?
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Get technical

  • What is the Federal Reserve’s “dual mandate”?
  • Does the Federal Reserve have a specific target for inflation?
  • Why doesn’t the Federal Reserve set an inflation target of 0 percent?
  • Does the Fed focus on underlying inflation because it doesn’t care about certain price changes?
Get technical

What are the different types of 'flation?

Have you been hearing different inflation related terms mentioned on social media or in the news and want to learn more? We've created a new stop motion video series that explains different types of 'flation with everyday items, like potato chips. Watch the videos below to find out how! For more of our social content, follow us on Twitter, Facebook, LinkedIn, and Instagram to stay up to date with our latest inflation work.

Disinflation, explained!

Shrinkflation, explained!

Stagflation, explained!

Hyperinflation, explained!

Deflation, explained!

Infographics on inflation

Infographics on Inflation

Why is what people expect inflation to do so important?

How does raising interest rates help to lower inflation?

Why do policymakers filter out food and energy prices to get a read on where inflation is headed?

Featured news

Lowering Inflation: The Who, What, and How

CfIR leaders and experts from other Banks discuss how the Federal Reserve works to control inflation

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Robert Rich, director of the Center for Inflation Research and senior economic and policy adviser, discussed common inflation misconceptions on Marketplace.

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Download this PowerPoint and take the Cleveland Fed’s Inflation 101 Quiz.
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