Inflation has hardly been out of the news over the past few months. Last year we heard talk of deflation and we are now starting to hear the term stagflation, but what do they all mean, and more importantly how do they affect you?
Let’s start with some basics, what are inflation, stagflation, and deflation?
Inflation is the way we measure the rising price of goods and services. In the UK we have two measures, the Consumer Price Index (CPI) and the Retail Price Index (RPI). Both are measured by comparing the relative prices rises, or indeed falls, of a basket of goods believed to be relevant to our general spending habits.
RPI includes the cost of borrowing, CPI does not.
The UK has generally lived through times of positive inflation, however, last year deflation was thought by some to be a possibility.