The rate of increase in the level of prices for goods and services as measured by the monthly Consumer Price Index (CPI) and the Retail Prices Index (RPI) and expressed as a percentage. Gradually rising inflation is a sign the economy is steadily growing so the Bank of England has a medium term inflation target of 2%. However, when inflation rises, the purchasing power of money falls. Wages and investments therefore need to grow at least by the rate of inflation just to keep their value in real terms.

This definition is for general information purposes only