Inflation explained: What lies behind and what is ahead?

Inflation is defined as a process of continuously rising prices and falling purchasing power. In other words, a general and broad-based increase in the price of goods and services over an extended period. The main objective of central banks is to keep prices stable, to preserve the integrity and purchasing power of people's money. The most common inflation indicator measures the average change in the price of a basket of consumer goods and services over time. The closest approximation of what people intuitively understand by the term inflation is the change in their cost of living. Inflation is expected to remain significantly above the euro area inflation target of 2 % for some time, due to continued geopolitical uncertainty and persistent supply bottlenecks.

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