CPI and Inflation Rate Calculator
Use the tools below to calculate the Consumer Price Index (CPI) based on a basket of goods, or determine the annual inflation rate using two different CPI data points.
1. Calculate Consumer Price Index (CPI)
2. Calculate Inflation Rate (%)
Understanding CPI and Inflation Calculations
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation.
How to Calculate CPI
To calculate the CPI, you compare the cost of a fixed "basket" of goods in a specific year to the cost of that same basket in a designated base year. The formula is:
CPI = (Cost of Basket in Current Year / Cost of Basket in Base Year) × 100How to Calculate Inflation Rate
The inflation rate represents the percentage change in the price level (CPI) over time. To calculate the inflation rate between two periods, use the following formula:
Inflation Rate = [(CPI in Current Year – CPI in Past Year) / CPI in Past Year] × 100Suppose the cost of a basket of goods in 2020 (Base Year) was $1,200. In 2023, the same basket costs $1,350.
- CPI 2023: (1,350 / 1,200) * 100 = 112.5
If the CPI in 2022 was 108.0, the inflation rate for 2023 would be:
- Inflation Rate: [(112.5 – 108.0) / 108.0] * 100 = 4.17%
Why Monitoring CPI Matters
CPI is a critical economic indicator used by governments and central banks (like the Federal Reserve) to make decisions about monetary policy. If the inflation rate rises too quickly, central banks may increase interest rates to cool the economy. For consumers, a rising CPI means purchasing power is decreasing; essentially, your dollar doesn't buy as much as it used to.