Inflation is the rate at which prices for goods and services rise over time. When inflation is 3%, a basket that cost €100 last year might cost €103 today. Your money buys a little less unless your income or savings keep pace.

Moderate inflation is normal in growing economies. Very high inflation erodes purchasing power quickly and pushes central banks to raise interest rates.

What causes inflation

Common drivers include strong consumer demand, higher wages, supply chain disruptions, and rising energy costs. Expectations matter too: if businesses and workers expect prices to keep rising, they may set prices and wages higher in advance.

How central banks respond

The ECB targets price stability, historically around 2% inflation over the medium term. When inflation runs too hot, monetary policy tightens through higher ECB interest rates, which can slow spending and ease price pressure.

Protect your purchasing power

Earn on cash in a Savings Account, automate saving with budgeting tools, and consider whether a Term Deposit fits your timeline. For long-term goals, some people combine cash savings with investments, understanding that markets carry risk. Track spending with Budgeting so lifestyle costs do not outrun your income.