GuideEconomy
Inflation: what it does to money sitting still
The number in your account can stay the same while what it buys shrinks.
Inflation is the general rise in prices over time. When it goes up, the same amount buys fewer things. Money sitting still doesn't lose nominal value, but it loses purchasing power.
How it is measured
Each country tracks a basket of goods and services. In Brazil, the official index is the IPCA, calculated by IBGE. In Spain, the IPC is calculated by INE. Always check the official agency for the latest figure.
Nominal and real return
Nominal return is what the investment pays. Real return is what is left after subtracting inflation for the period. An investment that earns less than inflation makes money shrink, even while showing a profit on the statement.
