Inflation vs hyperinflation for traders and investors
As of November 2025, US Consumer Price Index (CPI) inflation is now close to 3% annually – far below pandemic-era peaks and well below hyperinflationary levels. While inflation remains above the long-term average, the data suggests it has eased and stabilised since 2022.
Hyperinflation refers to a rapid and uncontrolled increase in an economy’s general price level. It’s typically defined as inflation of around 50% per month or 1,000% per year – conditions rarely seen outside severe economic crises. The US and most advanced economies remain well below such thresholds.
Although fears of runaway inflation were widespread in 2021–2022, subsequent years have seen price growth moderate towards central bank targets. As a result, current discussions have shifted from hyperinflation to how investors and consumers can manage the effects of moderate or elevated inflation.
What is Hyperinflation vs. high inflation?
Hyperinflation and high inflation describe different degrees of price growth within an economy. Understanding this distinction helps place current inflation trends in context.
| Comparison | High inflation | Hyperinflation |
|---|---|---|
| Definition | A sustained rise in prices above the long-term average, often between 5% and 10% a year. | An extreme and uncontrolled increase in prices, typically 50% or more a month. |
| Common causes | Strong demand, higher production costs, or supply chain pressures. | Severe instability, loss of confidence in the national currency, or excessive money supply growth. |
| Central bank response | Tightening monetary policy, such as raising interest rates, to bring inflation back towards target levels. | Loss of monetary control, where standard policy tools become ineffective. |
| Economic impact | Gradual erosion of purchasing power and increased living costs. | Rapid currency devaluation and severe disruption to normal economic activity. |
| Examples | The US and UK during the 1970s; Argentina in the early 2010s. | Weimar Germany (1923), Zimbabwe (2008), Venezuela (from 2016 onwards). |
| Frequency | Relatively common in global economic cycles. | Extremely rare, occurring mainly during major crises. |
While high inflation can reduce purchasing power, hyperinflation leads to a near-total loss of confidence in money itself. Most developed economies focus on maintaining stable inflation through consistent monetary policy, making hyperinflation highly improbable under current frameworks.
Learn more in our comprehensive inflation guide
What causes hyperinflation?
Hyperinflation tends to occur under extreme economic or political conditions, such as war, severe instability, or a transition from a command to a market economy.
These conditions often lead governments to expand the money supply rapidly to fund spending when revenues fall. As prices rise, wages and public costs increase, creating a feedback loop that accelerates inflation further.
Modern developed economies, including the US and UK, have independent central banks that target inflation directly, making hyperinflation highly unlikely in 2025.
Historical examples of hyperinflation
Hyperinflation is rare and localised.
Examples include Weimar Germany (1923), Brazil (late 1980s–1990s), and Venezuela (from 2016 onwards).
In Weimar Germany, monthly inflation reached about 29,500%, causing prices to double every few days. Brazil’s episode saw monthly inflation near 80%.
By contrast, current US inflation of around 3% represents price growth broadly consistent with long-term economic norms (Trading Economics, 5 November 2025).
How do stocks react to hyperinflation?
Data on stock market performance during hyperinflation are limited. Historical evidence suggests that share prices may rise nominally during high inflation because companies can pass higher costs to consumers.
However, real (inflation-adjusted) returns often remain negative when inflation is extreme. For instance, in the 1920s, German and Brazilian equities increased in nominal terms but failed to preserve purchasing power.
For moderate inflation levels (around 2–8% annually), equities can still perform relatively well if companies maintain pricing power and stable demand.
Past performance is not a reliable indicator of future results.
Preparing for periods of higher inflation
Periods of elevated inflation can reduce the real value of cash holdings and fixed-income assets. Although hyperinflation is extremely rare, moderate inflation can still erode purchasing power over time.
Central banks typically raise interest rates to bring inflation down, which can affect bond valuations and borrowing costs.
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FAQ
How to protect against inflation
Savings and fixed-income assets can lose purchasing power when prices rise faster than the returns they generate. Assets such as gold, commodities, and equities in energy or resource-linked sectors have historically performed better during periods of higher inflation, as they can absorb or pass on increased costs and maintain underlying value. Past performance is not a reliable indicator of future results.
What to do during high inflation
During periods of elevated inflation, preserving purchasing power is often the main focus. Holding a diversified mix of real assets, inflation-linked bonds, and equities with strong pricing power can help reduce the effect of rising prices. While hyperinflation remains largely historical and exceptional, evidence from past moderate inflationary periods indicates that a measured, long-term strategy is generally more effective than short-term or reactive actions. Past performance is not a reliable indicator of future results.
Who benefits from inflation
Borrowers with fixed-rate debt may find that the real value of their repayments decreases as prices rise, since they repay with money that’s worth less over time. However, persistent high inflation can disrupt economic stability, meaning any such benefit is often limited and dependent on broader market conditions. Past performance is not a reliable indicator of future results.
Where to invest during inflation
Historically, commodities, property, and inflation-linked bonds have been used to help preserve value during periods of rising prices. Equities in sectors tied to essential goods or resources may also perform more steadily when inflation is moderate. By contrast, periods of hyperinflation are rare and unpredictable, and reliable data on asset performance under such conditions are limited. Past performance is not a reliable indicator of future results.