Inflation
Definition
The rate at which the general price level of goods and services increases over time. If inflation is 3%, something that costs $100 today will cost $103 next year. It reduces the purchasing power of your money — a dollar buys less stuff.
Why It Matters
Inflation erodes savings that sit in low-yield accounts. Money in a 1% savings account during 3% inflation is actually losing 2% in purchasing power annually. You need investments growing faster than inflation to build real wealth.
Example
Today a coffee costs $5. With 3% annual inflation, in 10 years it costs ~$6.72. If your salary doesn't keep up with inflation, you're getting a pay cut. Your $50,000 salary needs to be $67,200 in 10 years to have the same purchasing power.
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Pulsafi definitions are sourced from primary regulatory and industry references. See our methodology and data sources.