In late 2019, the overall annual rate of inflation was running at just about 1.8% according to the Consumer Price Index (CPI). Similarly, the U.S. Department of Agriculture reported that retail food prices were 1.8% higher in February 2020 than they had been the year before.

In the summer of 2021, however, inflation began to rear its ugly head once again, with U.S. consumer prices recording their largest annualized increases in more than 13 years. Whether higher prices will stick around, or if it is just transitory as a result of the economic recovery from the COVID-19 pandemic remains to be seen.

We've been through worse inflationary times. Still, there's always talk about inflation and cost of living increases, but what do these terms really mean? And most important, how do they affect your daily life?

  • Inflation measures the increase in the price of goods and services or the decrease in the buying power of the dollar.
  • Cost-of-living measures the change, up or down, of the basic necessities of life, like food, housing, and healthcare.
  • Housing prices are affected by many factors but one of the biggest of them is the cost of borrowing.

Check out this article to understand how inflation may affect your cost of living.