Defining inflation was not always easy. Irving Fisher began this task in earnest in the early twentieth century. He organized the first meeting of the Econometric Society in 1930, was elected its first president and oversaw the first issue of the society's renowned Econometrica journal, which published the proceedings of its first meeting. The society's constitution was also published there, declaring that it was “for the advancement of economic theory in its relation to statistics and mathematics”.

Fisher had long been interested in price stability. He devised a statistical index that could be used to measure changes in the aggregate price level, called Fisher's (1921) “ideal” index. The next year he published a treatise on price indices, The Making of Index Numbers (1922), that included implementing the index to provide a historical sequence of data on the US price level during the high-inflation war years of 1914– 18.

The rate of change in the aggregate price level is the definition of the inflation rate. Fisher and others since him have applied this measure, or similar ones, to the US economy and shown how the index changes over time. This is typically presented as the rate of change at an annual rate.

This annual rate of inflation measures the change in the price index relative to a year ago. It is measured relative to the average price level over the current month compared to that average in the same month a year ago. Alternatively, the comparison can be to the average price level over the current quarter of a year relative to the average over the same quarter a year before. Equally, it simply can measure the percentage change in the index over a calendar year. This allows the calculation of an annual percentage change in the price level, as given from one month to the same month a year later, from one quarter to the same quarter a year later or on a calendar year basis.

Fisher showed how money changes in value in terms of the actual goods and services that people can buy with money. If you hold a dollar bill, then you can purchase one dollar's worth of goods.