What Is Inflation?

Inflation has been top of mind for investors in recent years, but what is inflation and why does it matter?

inflation written on calculator screen with pen and notepad and hundred dollar bills
(Image credit: Getty Images)

Inflation has probably been the single biggest factor roiling the financial markets over the past two years. But what is inflation, what causes it, and why does it matter?

Let's start with the basics. Inflation is an increase in the general price level of goods and services. In other words, inflation means rising prices. If you paid $4 for a cheeseburger last year, and you're paying $4.50 today, you have experienced inflation.

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Charles Lewis Sizemore, CFA
Contributing Writer, Kiplinger.com

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.