Inflation: why your money is worth less each year

Inflation is the general rise in prices over time. If a year's inflation is 5%, what you buy today with ₲100,000 will cost you roughly ₲105,000 next year. If your money just sat there earning nothing, that same ₲100,000 will buy you less.

How it's measured

In Paraguay, the Central Bank publishes a year-over-year inflation figure every month (how much prices rose compared to the same month the year before). In September 2026, year-over-year inflation was 1.7%, a relatively low number by regional standards.

The example of the cash under the mattress

The number of bills doesn't change, but what that number can buy does if prices rise and your money earns nothing.

Nominal return vs. real return

The nominal return is the rate your bank quotes you (say, 9.95% a year on a CDA). The real return is that number minus inflation for the period: roughly 9.95% − 1.7% = 8.25% real positive. When the real return is positive, your money gains purchasing power over time, not just a bigger number.

Comparison by where you keep your money

This doesn't mean all your money should sit in a CDA: your emergency fund needs to be available immediately, even if it earns less. But money you won't need short term loses value if it just sits there earning nothing.

Why inflation doesn't hit everyone the same

The published figure is an average across a general basket of goods and services. If your spending is concentrated in something that rose faster than average (say, rent in a high-demand area), your "personal inflation" can be higher than the official number. Pay attention to how your actual expenses rise, not just the headline figure.

What you can do

• Don't leave large sums in cash for long: you lose value quietly.
• Look for your savings to earn at least close to inflation, with simple options like a CDA for money you don't need right away.
• Review your income now and then: if your pay doesn't rise with your expenses, your purchasing power drops even if the pay number stays the same.

A quick way to think about it

If a product cost ₲10,000 a year ago and costs ₲10,170 today, that 1.7% difference is inflation at work on that single item. Multiply that across everything you buy in a typical month, and you get a sense of why letting money sit idle slowly chips away at what it can do for you, even when nothing dramatic seems to be happening.

Calculate the effect on your money

In the savings vs. inflation calculator, enter your amount, the rate you're offered and the term, and see the real return, already adjusted for the month's inflation.

Frequently asked questions

Does inflation always raise every price equally?

No. Some goods and services rise more than the average, others less. The official figure is a general average.

Should I invest all my savings to beat inflation?

Not all of it: you need a part available immediately (emergency fund). The rest, if you won't use it soon, should ideally earn some return.

Does a fixed salary lose value to inflation?

Yes, if the salary doesn't adjust at the same pace as rising prices, you can buy less with the same nominal amount.

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This article is educational, not financial or investment advice. Inflation and rate figures change: confirm them with the official source.

Sources

• Central Bank of Paraguay (BCP): year-over-year inflation for September 2026 and average savings and CDA rates, June 2026.