Inflation refers to the general increase in prices and the fall in the purchasing value of money. It is measured by the rate at which the prices of goods and services rise over time, often expressed as a percentage. Central banks, like the Federal Reserve, monitor inflation closely to maintain economic stability. When inflation is moderate, it can indicate a growing economy. However, high inflation can erode savings and reduce consumer spending, leading to economic uncertainty. Policymakers use various tools, such as interest rate adjustments, to control inflation and ensure a balanced economic environment.