Inflation Rate Calculator
1. Calculate Historical Inflation Rate
Find the percentage change in price between two points in time.
2. Future Value of Money
Predict how much an amount will be worth in the future based on annual inflation.
Understanding Inflation and Your Purchasing Power
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.
How is Inflation Calculated?
The standard formula to calculate the inflation rate between two periods is:
Inflation Rate = ((New Price – Old Price) / Old Price) × 100
The Consumer Price Index (CPI)
The most common measure of inflation is the Consumer Price Index (CPI). Governments track the prices of a "basket of goods" including food, housing, transportation, and medical care. When the cost of this basket goes up, inflation occurs.
Real-World Examples of Inflation
| Item | Price in 1970 | Price in 2024 (Adjusted) | Explanation |
|---|---|---|---|
| Gallon of Milk | $1.32 | ~$4.00+ | Reflects general price increases over 50 years. |
| Dozen Eggs | $0.60 | ~$2.50+ | Subject to both inflation and supply chain shifts. |
| New House | $23,400 | $400,000+ | Real estate often outpaces general inflation. |
Why Does Inflation Matter?
If your salary stays the same while inflation rises by 5%, you are effectively taking a 5% pay cut. Your money buys fewer groceries, less gas, and covers less rent. This is why investors seek returns that "beat" inflation to ensure their wealth grows in real terms, not just nominal terms.
How to Use This Calculator
- Historical Rate: Enter the price of a specific item from a previous year and its price today to see the cumulative inflation for that specific item.
- Future Value: Enter your current savings and an expected inflation rate (historically around 2-3% in the US) to see what that money will feel like in the future.