Devaluation vs. Inflation — What's the Difference?

Controlled by government or monetary authorities.

Measured by indices like CPI.

Policy decision by central authorities.

Increase in general price level.

Impacts exchange rates.

Reduces purchasing power.

Affects international trade dynamics.

Affects the economy broadly.

Deliberate reduction in currency value.

Can be caused by various factors.

In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket. The opposite of devaluation, a change in the exchange rate making the domestic currency more expensive, is called a revaluation.

In economics, inflation (or less frequently, price inflation) is a general rise in the price level of an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.

To lessen or cancel the value of.

The act of inflating or the state of being inflated.

To lower the exchange value of (a currency) by lowering its gold equivalency.

A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money.

To lower the exchange value of a currency by lowering its gold equivalency.

The rate at which this increase occurs, expressed as a percentage over a period of time, usually a year.

The removal or lessening of something's value.

An act, instance of, or state of expansion or increase in size, especially by injection of a gas.

(economics) The intentional or deliberate lowering of a currency's value compared to another country's currency or a standard value (e.g. the price of gold).

(economics) An increase in the general level of prices or in the cost of living.

Depreciation.

(economics) A decline in the value of money.

An official lowering of a nation's currency; a decrease in the value of a country's currency relative to that of foreign countries

(economics) An increase in the quantity of money, leading to a devaluation of existing money.

The reduction of something's value or worth

Undue expansion or increase, as of academic grades.

(cosmology) An extremely rapid expansion of the universe, theorized to have occurred very shortly after the big bang.

The act or process of inflating, or the state of being inflated, as with air or gas; distention; expansion; enlargement.

The state of being puffed up, as with pride; conceit; vanity.

Persistent expansion or increase in the general level of prices, usually caused by overissue of currency, and resulting in a reduced value of the currency. It is contrasted with deflation, and is when it occurs to a very high degree is called hyperinflation.

A general and progressive increase in prices;

(cosmology) a brief exponential expansion of the universe (faster than the speed of light) postulated to have occurred shortly after the big bang

Lack of elegance as a consequence of being pompous and puffed up with vanity

The act of filling something with air

Governments or central banks may devalue their currency to correct a trade imbalance or boost economic growth.

Devaluation is a deliberate policy action, while depreciation occurs naturally through market forces without government intervention.

Through indices like the Consumer Price Index (CPI), which tracks changes in the price level of a market basket of consumer goods and services.

Inflation reduces purchasing power, making goods and services more expensive and possibly leading to a higher cost of living.

Through monetary policies, such as adjusting interest rates and controlling the money supply.

It can make repaying foreign debt more expensive for a country, as it requires more of the devalued currency to purchase the same amount of foreign currency.

Moderate inflation is normal and can stimulate economic growth, but high inflation can lead to economic instability.

Yes, by making imported goods more expensive, devaluation can contribute to overall price increases.

Not directly; while devaluation affects the currency's value and can influence inflation, controlling inflation often requires broader monetary and fiscal policies.

Indicators include rising prices for goods and services, increased cost of living, and reduced purchasing power.

It directly lowers the currency's value against foreign currencies in the exchange market.

It can boost exports, reduce trade deficits, and stimulate economic growth by making domestic goods more competitive abroad.

Central banks may raise interest rates to combat high inflation, as higher rates can reduce borrowing and spending.

Due to the potential for increased costs of imports and the risk of inflationary pressures.

Investing in assets that typically appreciate with inflation, such as real estate or commodities, and diversifying investments.