Inflation is a rise in the general price level of goods and services in an economy over time, leading to a decrease in the purchasing power of money. It is usually measured as an annual percentage increase. Inflation occurs when demand for goods and services exceeds their supply, causing prices to rise. This decrease in the value of money means that consumers can buy fewer goods and services with the same amount of money. Moderate inflation is considered beneficial for economic growth, but high or unpredictable inflation can harm an economy, erode savings, and disrupt financial planning. Central banks often implement monetary policies to manage and control inflation levels within a target range.

Yield Curve

The yield curve is a graphical representation of interest rates for bonds with different maturities. It plots the yields on the vertical axis and the time to maturity on the horizontal axis. Generally, a normal yield curve slopes upwards, indicating that longer-term bonds offer higher yields compared to shorter-term bonds. In contrast, an inverted yield curve slopes downwards, implying that short-term yields are higher than long-term yields. The yield curve provides insights into market expectations about economic growth and inflation. An upward-sloping curve suggests optimism, while a flat or inverted curve may signal economic uncertainty or potential recession. Central banks and investors closely monitor the yield curve as it can influence monetary policy and investment decisions.