Inflation
The rate at which prices for goods and services rise over time.
When inflation is high, each unit of money buys less than before. Central banks often raise interest rates to cool it down.
Inflation is measured by tracking the price of a fixed basket of goods and services and seeing how much more it costs than a year ago. In the US that basket is the Consumer Price Index, published monthly by the Bureau of Labor Statistics. A reading of 3% means the same basket costs 3% more than it did twelve months earlier.
It matters to a trader for two reasons. It drives what the Federal Reserve does with interest rates, and rate expectations move bonds, currencies and stocks. And it quietly eats returns: if your account grows 5% in a year when inflation runs 4%, you are up 1% in real buying power, not 5%. A dollar in 1913 buys about three cents of goods today, which is inflation compounding over a century.