Inflation Calculator

Inflation reduces purchasing power — the same amount of money buys fewer goods and services over time. For example, at 3% annual inflation, $100 today would only buy about $74 worth of today's goods in 10 years. This is why investments need to outpace inflation to maintain real value.

Most central banks target 2% annual inflation as a healthy rate. This small amount of inflation encourages spending and investment. Deflation (negative inflation) can be harmful as it discourages spending. Hyperinflation (very high rates) destabilizes economies.

Inflation is typically measured using the Consumer Price Index (CPI), which tracks the average change in prices paid by consumers for a basket of goods and services. The Bureau of Labor Statistics (BLS) in the US publishes CPI data monthly.

The average annual US inflation rate since 1913 has been approximately 3.2%. However, it varies significantly: the 1970s saw rates above 10%, while the 2010s averaged around 1.8%. Recent years (2021-2023) saw elevated inflation of 5-9% before moderating.

Common inflation hedges include: investing in stocks (historically outpace inflation), real estate, Treasury Inflation-Protected Securities (TIPS), I Bonds, commodities, and maintaining a diversified portfolio. Keeping large amounts in low-interest savings accounts loses purchasing power over time.