For most people, inflation is a bad word that often means paying higher prices for certain commodities, like petrol; in reality, inflation only occurs when prices rise across the economy.

Generally speaking, prices for certain items rise and fall quiet often.  You may pay £1 for petrol one month and only 50p the next.  This is not inflation; this is simply a rise in price.

Inflation occurs when the goods and services of one country or economy overall increase; while the value of currency may stay unchanged.  The term inflation rate is based upon a 12-month overall change in pricing of many items listed on the Consumer Prices Index or CPI.  The list of services and items on the CPI are based upon consumer consumption; therefore, petrol would have more weight on the CPI than say personal computers.

As spending patterns change, goods and services are added or removed from the CPI; as well, they may carry more weight one year than they did in the past and vice versa.  In relation to the current economy and the growing recession; inflation will most likely be the next bullet to dodge.  In the past, a recession often leads to inflation.  As the value of currency goes down; the prices go up; this in turn will most likely cause inflation rates to rocket.  The good news, inflation often leads to recessions ending and things getting back to some type of normalcy.