Inflation rate is the percentage increase in the overall price level of goods and services in an economy over a period of time. It is typically measured using the Consumer Price Index (CPI) and is a key indicator of the health of an economy.
Inflation rate is calculated by comparing the current CPI to the CPI from a previous period (usually a year). The formula for calculating inflation rate is: (Current CPI - Previous CPI) / Previous CPI x 100. This will give you the percentage change in the price level.
Discount rate is the interest rate that is used to determine the present value of future cash flows. It is often used in financial decision making to determine the value of investments and to evaluate the cost of borrowing money.
In general, when inflation rate increases, the discount rate also increases. This is because inflation erodes the purchasing power of money over time, so investors will require a higher return on their investments to compensate for this loss. On the other hand, when inflation rate decreases, the discount rate will also decrease.
Inflation rate and interest rates are closely related. When inflation rate is high, central banks may raise interest rates to control inflation by making borrowing more expensive. This can slow down economic growth. Conversely, when inflation rate is low, central banks may lower interest rates to stimulate economic growth by making borrowing more affordable.