The inflation rate measures how much the general level of prices for goods and services rises over time. It is usually expressed as a percentage and indicates the decrease in purchasing power of money. For example, if the inflation rate is 3%, a product that costs $100 today will cost $103 next year. Central banks, like the Federal Reserve, monitor the inflation rate to help manage the economy. A moderate inflation rate is considered normal, but high inflation can erode savings and affect living standards. Conversely, deflation, or negative inflation, can lead to economic stagnation.