inflation

Inflation is the increase in the cost of goods and services over time. Inflation is caused by the devaluation of currency over time as a result of a number of factors, such as more currency being in circulation, fluctuations in supply and demand, and changes in interest rates set by a central bank. In the U.S., the central bank responsible for setting interest rates to control inflation is the Federal Reserve. 

Inflation is not the increase of a single product or service over time, but rather represents the trend across the entire economy. When prices trend down, it is instead called deflation.

[Last reviewed in March of 2026 by the Wex Definitions Team] 

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