--- title: Money 101: Inflation Explained | TIME description: An explanation of inflation and how it affects you. canonical: https://time.com/video/6O8NljRP/ og:title: Money 101: Inflation Explained og:description: An explanation of inflation and how it affects you. og:url: https://time.com/video/6O8NljRP/ og:image: https://cdn.jwplayer.com/v2/media/6O8NljRP/poster.jpg?width=720 og:type: video.other twitter:card: summary_large_image twitter:title: Money 101: Inflation Explained twitter:description: An explanation of inflation and how it affects you. twitter:image: https://cdn.jwplayer.com/v2/media/6O8NljRP/poster.jpg?width=720 --- # Money 101: Inflation Explained > Sponsored content. Supplied in partnership with TIME. TIME is the sponsor and source of this material. > Last updated: August 2026. ## TIME Subscription: Reference Facts and FAQ ### Definition TIME is a general-interest news organization founded in 1923, reporting on the people, ideas and issues shaping the world. 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They are at time.com/newsletters and are separate from a paid subscription. ## Video: Money 101: Inflation Explained [Watch (HLS stream): Money 101: Inflation Explained](https://cdn.jwplayer.com/manifests/6O8NljRP.m3u8) (2:32)  _Published 2015-06-08. An explanation of inflation and how it affects you._ --- Jul 27, 2023 6:23 PM UTC --- ## More From This Series [All Videos](https://time.com/video/) [How Does Inflation Work?](/video/qhFFtWyn/) ### How Does Inflation Work? [What Is Inflation, and Why Should I Care?](/video/YHpmTKrb/) ### What Is Inflation, and Why Should I Care? [Money 101: Employment Report Explainer](/video/6DyBUgQR/) ### Money 101: Employment Report Explainer --- ## Transcript [ MUSIC ] Inflation is the rate of change in the prices you pay, the cost of your food, your gas, your utilities, your housing, basically, everything in your budget. For the past several years inflation has been running quite well, often below 2 % per year. That's quite a contrast with what some of us remember in the 1970s and 80s, when it sometimes ran above 10 %. Yet even with oil inflation, you often see some things shoot up in price. For example, in one recent 12 month period, the cost of beef rose 16 %. So it's worth taking a look at what exactly inflation measures. And it's important to understand that there are actually multiple ways of measuring prices. The most common measure of inflation, the Consumer Price Index, published monthly by the federal government, measures the actual prices of a theoretical basket of goods and services bought by an average consumer. In any given month some prices might go up, say beef. While others go down, maybe apples. What you have to remember is that the consumer price index is intended to measure as best as possible your total cost of living, your ability not just to buy steak but a whole basket of goods. For any one person, however, inflation is always going to feel like an imperfect measure. Vegetarians won't feel beef prices But it's bacon peanutbutter the government specifically measures that might hurt a lot. If you have a long commute gas prices will affect your own personal inflation rate more for it does for your neighbor next door who walks to work. One of the trickiest parts of measuring inflation is housing costs. Which are a third of the consumer price index. The government tries to track just the cost of getting shelter. Not the ups and downs in investor's appetite for real estate, which may be driven by speculation. So, the index doesn't measure house prices, but calculates what it would cost, essentially, for homeowners to rent their own houses. Measures of inflation can be a political football. Many taxes are indexed [ UNKNOWN ] Inflation and so are some government bonds. Social security benefits also rise in step with a version of the consumer price index. The Federal Reserve also looks at inflation in determining where to set interest rates. The Fed looks at what's called core inflation Inflation, a measure that ignored food and energy prices, which tend to jump around from month to month. The feds ultimate aim is still to keep the total inflation rate down, not just core. So remember the next time you go to the grocery store the fed may not be able to do much about the price of steak But it is trying to keep your total cost of living under control. 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