The rate at which general level of prices increases over a given period of time. It reflects an overall increase in prices or the increase in the cost of living in a country. Inflation, by definition, is an increase in the general price level of goods and services (asset and consumer prices) over a period of time. This state of price development, which is typically associated with an expansion in the supply of money and credit in an economy, comes out when the inflation rate picks up.

By nature, inflation reduces the value of money over time. Inflation expectations do play a role in the development of a market price direction and reaction to increasing price levels, as consumers tend to spend more on necessities (rations), sooner than later, in a bid to buy at current prices, rather than wait for prices to move up and further impact their purchasing power.