What is inflation? Why prices rise and what it means for your money
By SendPay Business · · 2 min read
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Inflation is the rate at which prices for goods and services rise over time. When inflation is high, each pound, euro or dollar buys less than it did before.
How it is measured
Statistics agencies track the prices of a typical basket of goods and services, such as food, energy, rent and transport. The Consumer Prices Index (CPI) is the most common measure. The yearly change in the index is the inflation rate you see in the news.
What usually causes it
- Demand outpacing what businesses can supply.
- Rising costs, such as energy or wages, passed on in prices.
- A weaker currency making imports more expensive.
- Expectations of higher prices feeding into wage and price rises.
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What it means for your money
Money in an account that earns less than inflation loses buying power over time. Central banks usually raise interest rates to bring high inflation down. Inflation differences between countries also help explain why exchange rates move over the long run.
Where SendPay fits
SendPay does not give investment or savings advice. A SendPay platform lets your customers hold GBP, EUR and USD and buy, sell and hold crypto, powered by licensed partners.
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Questions people ask
What is my interest worth after inflation?
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Real interest rate calculator →How much will prices rise by?
Our free inflation calculator shows what the same shopping will cost in future, what cash is worth in today's money, and whether your savings rate beats inflation.
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Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.