Skip to content
teloria
← Back to the glossary

Glossary

Inflation

Inflation is a general rise in prices over time, which means each dollar buys less and fixed payments buy less as the years pass.

Updated September 15, 2026

Inflation is a general rise in prices over time. When prices rise, each dollar buys less, so the same money covers fewer groceries. The risk that rising prices leave your money buying less is called inflation risk.

If prices rise 3 percent over a year, something that cost $100 costs about $103, and $1,000 kept in cash buys roughly what $970 bought before. Fixed payments feel this most: a bond with a fixed payment of $50 a year pays the same $50 whether prices rise or not.

In the United States, the Bureau of Labor Statistics publishes the Consumer Price Index each month, a common measure of inflation. The Federal Reserve aims for inflation of 2 percent a year over the longer run. Actual inflation varies, so savings rates sometimes keep up with prices and sometimes do not.

Related terms

Used in these lessons

How this definition was made

  • Written by an AI model (Claude) following Teloria's editorial standard.
  • Every factual claim was checked by a separate AI fact-check against official US government and regulator sources.

Official sources consulted

  • investor.gov · /introduction-investing/investing-basics/what-risk
  • investor.gov · /introduction-investing/investing-basics/investment-products/bonds-or-fixed-income-products/bonds
  • investor.gov · /introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/what-are
  • bls.gov · /schedule/news_release/cpi.htm
  • bls.gov · /cpi/
  • federalreserve.gov · /faqs/economy_14400.htm
  • investor.gov · /additional-resources/information/youth/teachers-classroom-resources/risk-and-return