The economy

Inflation

The general rise in prices over time, which makes money buy a little less each year.

Why does it matter?

It raises companies' costs, and it changes what a return is really worth: a 5% gain with 4% inflation buys only about 1% more.

How do I read it?

In the U.S. it is usually measured by the CPI; in Brazil, by the IPCA. Some companies can raise their own prices to keep up with inflation; others can't.

Example

With 5% inflation a year, something that costs $100 today costs about $105 next year, and about $163 after ten years.