Put simply, inflation is the impact of rising prices for the goods and services we buy or use. This jargon buster covers the key idea – and our Explainer video covers how inflation and interest rates impact your savings. And this FAQ video covers investing to beat inflation.
Inflation is the rising cost of the things we all buy. For example, it costs a lot more to buy a postage stamp today than it did 50 years ago. This is due to inflation.
Inflation is calculated by the rate at which the price of goods we commonly spend our money on increases, such as bread, wine, public transport or cinema tickets.
In real terms, if the average cost of goods rises by, say 2%, you would need to spend 2% more to buy the same things you bought twelve months ago.