The inflation rate refers to the percentage increase in prices for goods and services over a specific period, usually annually. It is an important economic indicator that helps measure the purchasing power of money over time. A high inflation rate means that the general price level for goods and services has increased significantly, which can lead to a decrease in the value of currency. On the other hand, deflation occurs when prices fall, leading to an increase in the value of currency. Central banks often aim to keep inflation rates within a specific range to maintain stability in the economy.