What is Inflation?

Inflation is the general increase in prices. When inflation rises, the same amount of money buys fewer things. That’s why $20 today buys less than $20 did 10 years ago.

How is it measured?

The main index is the consumer price index, calculated by the national statistics office. It measures the price variation of a basket of products and services consumed by families.

Why does it matter for your finances?

If your investments yield less than inflation, you’re losing money in real terms. Example:

  • Inflation: 5% per year
  • Savings: 6% per year
  • Real gain: only 1%

How to protect yourself?

  • Invest in assets that yield above inflation
  • Inflation-linked government bonds guarantee real returns
  • Diversify between fixed and variable income
  • Track the monthly consumer price index