- The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
- Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.
- As inflation rises, every rupee will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a 10 INR pack of gum will cost 10.2 INR in a year.
- As inflation rises, purchasing power decreases, fixed-asset values are affected, companies adjust their pricing of goods and services, financial markets react and there is an impact on the composition of investment portfolios.