I

Glossary · PSX term

Inflation.

Inflation is the rate at which the general level of prices rises over time.

Definition

High inflation erodes the purchasing power of cash and savings, which is one reason many invest in stocks to try to keep ahead of it. In Pakistan, inflation has often run high, making real, after-inflation returns important.

Worked example

If inflation is 20% and your savings earn 15%, your money loses purchasing power in real terms.

Related on PSX Clarity

Consumer Price Index (CPI)

Purchasing power

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Intrinsic value

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