is inflation the lowering of the purchasing power
BREAKING DOWN 'Inflation'. As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a pack of gum that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls.
To ensure that your savings will have the necessary purchasing power, your savings will need to outpace inflation. The amount you save will need to increase by the same percentage of inflation every year to ensure purchasing power parity.