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EPRS - Inflation explained


Understanding inflation dynamics requires an understanding of the underlying concept and how it is measured. Inflation is defined as a process of continuously rising prices and falling purchasing power. In other words, a general and broad-based increase in the price of goods and services over an extended period. The main objective of central banks is to keep prices stable, to preserve the integrity and purchasing power of people's money. The most common inflation indicator measures the average change in the price of a basket of consumer goods and services over time. The Russian war on Ukraine is now likely to cause inflation to increase further, with underlying price pressure broadening and lingering supply-side bottlenecks.

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