Inflation is a measure of how much prices have risen for a basket of goods and services used by households, sometimes called the Consumer Price Index (CPI). The CPI is a popular way to track inflation in many countries. It can also be calculated more narrowly, for certain categories of goods or services, or for a specific geographic area. Statistical agencies measure inflation by comparing the current value of this basket to its previous value and then calculating the percentage increase, often on a monthly basis or annually.

Human needs require a wide and varied assortment of products and services. It is difficult to compare the prices of individual items, so a single value measurement such as the CPI is used. Inflation can be caused by a number of factors, including a build-up of pent-up demand or disruptions to production supply chains.

Companies are affected by inflation as well, mainly because of the higher costs they incur for inputs like raw materials and energy. These higher costs ultimately translate into higher prices for the goods and services they sell to consumers. The challenge is to raise prices high enough to cover the higher input costs but not so high as to suppress demand.

Surveys have found that people are more worried about inflation than ever before. Respondents feel it complicates household decision-making and that their daily lives are made more challenging by its consequences. In addition, people have a negative view of it because they anticipate more inequality effects.