What Is Inflation?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

Inflation is the term used in economics to describe the rate at which the price of a representative basket of goods is increasing. Some inflation is good, and central banks attempt to achieve a consistently inflation level of around 2%. However, if inflation becomes too high then purchasing power is reduced and consumer spending is reduced.

The typical response to undesirable inflation levels by central banks is to adjust interest rates; raise them to avoid high inflation to promote saving and reduce spending or lower them to encourage spending and lending.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.