Investor Glossary-inflation rateInvestor Glossary-inflation rateInvestor Glossary-inflation rateInvestor Glossary-inflation rateInsightful stock market charts - Click here
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Inflation Rate

The HTML to link to this page

The inflation rate is the increase in prices for a basket of goods and services expressed on a yearly basis. Put simply, if the basket costs $100 in year 1 and $104 in year 2, the inflation rate is 4%. Perhaps the most common measure of the inflation rate is the monthly Consumer Price Index (CPI), which is based on a survey of tens of thousands of items Americans commonly purchase. Other important measures of the inflation rate are the Producer Price Index and the GDP Price Deflator. The inflation rate has enormous consequences for the economy and, by extension, investors. A rising inflation rate prompts the Federal Reserve Board to push up interest rates to slow the economy; a declining inflation rate encourages the Fed to loosen monetary policy to stimulate demand. Bond prices move inversely with interest rates; thus a lower inflation rate increases bond prices, a higher rate reduces them. The relationship between stocks and the inflation rate is less fixed, but a modest inflation rate usually provides a good environment for stock prices.

Rate this inflation rate definition...

Learn about investing with the Investor Glossary Term of the Day

Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.

Popular Terms: APR, required rate of return, in escrow, per diem, stock split, cancelled check, labor relations, liquidity ratio, inflation, 401a, limit order, risk management, Key Rate Duration, retained earnings, FICO score, quality assurance, 144a, real GDP, command economy, dividends payable, deferred revenue, class C shares, stock market close, deferred tax, balance sheet, reverse mortgage, phantom income, ex-dividend, option premium, LIBOR, annual return, debt service coverage, open position, 1035 exchange, current ratio, EBITDA, implied volatility, average price per share, wholly-owned subsidiary, Zero Cost Collar, irrevocable trust, ex-dividend date, FTSE, diluted share, covered put, minority interest, VIX, 1031 exchange, margin rate

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use