In simple terms, it is prices going up.

In longer term measures, it is defined as a sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change.

Put differently, as inflation rises, every dollar you own buys a smaller percentage of a good or service.

How do we measure it: through a tracking stock called the Consumer Price Index (CPI).

According to our government, the Bureau of Labor Statistics uses this CPI value to track inflation on a monthly and annual basis.

According to the Bureau of Labor Statistics, the dollar experienced an average inflation rate of 2.0 percent, per year. Prices in 2018 are 2.0 percent higher than prices in 2017.

This means that a product bought today for about $100 U.S. dollars will cost about $102 U.S. dollars next year, and so on. Considering the annual inflation rate in the United States in recent years, a 2.0 percent inflation rate is a very moderate projection.

The Federal Reserve Rate uses a rate to charge banks for short-term lending. Many consider this to be the best gauge of short-term interest rates, in the 30-day to six month category.

So when we look at both:

          Annual inflation  Federal Reserve Rate
2017   1.9%                           1.8%
2016    2.1%                          0.2%
2015    0.7%                          0.2%
2014    0.7 %                         0.2%
2013   1.5 %                          0.2%

In these five years, inflation went up 6.9 percent or 1.38 percent per year, interest rates rose 2.6 percent for five years or 0.5 percent per year

The difference between the both is 36 percent.

Don’t you think interest rates might be too high? Think they should come down? We Do! Sadly, we believe the Fed does not. They have recently announced an attain to reach 2 percent interest rates as they believe the economy is humming.

If consumers and businesses can’t borrow because the cost of money has become too high, can the economy keep growing?

When the cost of money is higher than the cost of inflation (by 36 percent) it’s time to get ready for a rough economic ride.

Anthony Rivieccio is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving ones financial problems. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News, and The Bronx Chronicle. Mr Rivieccio is also currently an Adjunct Professor of Business , Finance & Accounting for both,  City University of New York & Monroe College, a Private University.  For financial assistance , Anthony can be reached at  (347) 575-5045. Feel free to visit their FACEBOOK Business page for past Financial Focus articles:  www.facebook.com/iwantmytaxmoney