Inflation rates measure how much the general level of prices for goods and services rises over time. When inflation is high, each unit of currency buys fewer goods and services, which can reduce purchasing power. Central banks, like the Federal Reserve, monitor inflation to maintain economic stability. Inflation is typically expressed as a percentage increase over a specific period, often annually. Various factors can influence inflation rates, including supply and demand, production costs, and monetary policy. Understanding inflation helps consumers and businesses make informed financial decisions.