Inflation

Inflation is an increase in the prices of goods and services. 

The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households (see Explainer: Inflation and its Measurement). 

The CPI is the measure of inflation used by the Reserve Bank of Australia in its inflation target, where it aims to keep annual consumer price inflation between 2 and 3 per cent (see Explainer: Australia's Inflation Target). 

Other measures of inflation are also analysed, but most measures of inflation move in similar ways over the longer term.

Causes of inflation

The main causes of inflation can be grouped into three broad categories:

1. demand-pull,
2. cost-push, and
3. inflation expectations.