The increase of prices in an economy over a period of time, usually annualised for comparative purposes. It is often thought to be caused by too much money chasing too few goods Ð an expansion in the money supply Ð or too strong rises in government spending. A small amount of inflation, say up to 2 or 3%, is thought to be acceptable but policy makers will normally respond to the threat of higher rates. In the UK, the benchmark of inflation is either the [[Retail Price Index]] (RPI) or the consumer price index (CPI). They are both measures of the cost of a basket of goods and services representing the average households purchases. Inflation is a persistent threat to savers, partly because the erosive effect it has on savings is unseen. In order to make real gains on your investments, the first task is to make sure your returns beat the rate of inflation. Index-linked products, which pay an interest rate that keeps pace with inflation, are one solution.