How does the inflation calculator work?

It compares the value of a currency at two different points in time. If you use actual price data, multiply your amount by the ratio of consumer price indices for the two years. If you use a fixed interest rate, increase the amount each year according to that interest rate.

What inflation rate should I use for my calculations?

In the US and many developed economies, the long term average is about three percent, with central banks generally targeting around two percent. Pick a value that's appropriate for the time period and country you're looking at.

What is the difference between overall inflation and average inflation?

The total inflation rate or cumulative inflation indicates how much prices have risen over a certain period of time. The average annual interest rate is the constant interest rate per year that would produce the same overall return after several years with yearly compounding.

Why is loss of purchasing power lower than inflation rate?

Inflation measures price increases in smaller amounts over earlier times; whereas loss of purchasing power is measured in larger amounts over later times. For example, if prices rise by fifty percent, then the purchasing power will fall by about one third.

Deflation is the opposite of inflation and describes a general decrease in prices. In a calculator it is represented by a negative average rate of inflation. It occurs when a later price index is below an earlier one.

Inflation Calculator

Your money

What do you want to work out?

Between two dates (U.S. CPI data)

By a fixed rate (projection)

Amount

Start year

End year

Equivalent amount

Total inflation: %
Average annual rate: %
Change in price: $

Purchasing power lost: %

Between your two years, U.S. prices rose about 86.9588%. That makes $100 then worth about $186.96 now.

Charts and schedule

Year-by-year value of your amount
Year	Equivalent value ($)	Cumulative inflation
2,000	100	0.00%
2,001	102.85	2.85%
2,002	104.47	4.47%
2,003	106.85	6.85%
2,004	109.7	9.70%
2,005	113.41	13.41%
2,006	117.07	17.07%
2,007	120.38	20.38%
2,008	125.03	25.03%
2,009	124.59	24.59%
2,010	126.63	26.63%
2,011	130.63	30.63%
2,012	133.33	33.33%
2,013	135.28	35.28%
2,014	137.48	37.48%
2,015	137.64	37.64%
2,016	139.38	39.38%
2,017	142.35	42.35%
2,018	145.82	45.82%
2,019	148.47	48.47%
2,020	150.3	50.30%
2,021	157.36	57.36%
2,022	169.95	69.95%
2,023	176.95	76.95%
2,024	182.17	82.17%
2,025	186.96	86.96%

The inflation calculator shows how the value of a currency changes over time. If you enter an amount, it will show you what that money would be worth in another year, how much prices have risen and at what annual rate this change has taken place.

This version can be used two ways: Select a start and end year, and the tool will use actual U.S. consumer price indexes to do the calculation. Alternatively, you can pick your own interest rate and project the amount forward or backward any number of years.

What is inflation?

Inflation means a general rise in prices and a decrease in the purchasing power of a currency. When prices go up, you can buy less for a dollar than before.

Inflation is always measured by comparing two points in time. A common figure of three percent would normally compare current prices with those from twelve months ago. The opposite of inflation is deflation where the price level falls and a currency's purchasing power rises.

How is inflation measured?

Statistical agencies measure prices monthly for a fixed basket of goods and services. In the United States, the Bureau of Labor Statistics tracks the Consumer Price Index (CPI-U) for all urban consumers. The basket includes eight major categories: food, shelter, clothing, transportation, medical care, recreation, education, and communication, as well as miscellaneous goods and services.

This index aggregates thousands of price data into a single number. The inflation rate between any two points in time is the change in this index, so a calculator only needs the index values at the beginning and end.

Calculation formula:

When comparing two data points, the equivalent amount is adjusted according to the ratio of the two index values.

\text{Value}_{\text{end}} = \text{Amount} \times \frac{\text{CPI}_{\text{end}}}{\text{CPI}_{\text{start}}}

For example, the average CPI-U value in 2000 was 172.2 and in 2020 it is 258.811. So $100 in 2000 had the same purchasing power as...

100 \times \frac{258.811}{172.2} \approx 150.30

The average annual rate is a constant interest rate that connects two index values and covers the period between them.

\text{Rate}_{\text{avg}} = \left(\frac{\text{CPI}_{\text{end}}}{\text{CPI}_{\text{start}}}\right)^{1/n} - 1

With a fixed interest rate, the amount increases annually according to the interest rate. This is normal compound interest calculation.

\text{Value} = \text{Amount} \times (1 + r)^{n}

In this formula, r is the annual interest rate in decimal form and n is the number of years. If you use the same formula in reverse, by dividing instead of multiplying, you can find out how much money you would have at a previous point in time.

Symbol	Meaning	Example
Amount	The sum you are tracking	100
CPI	Consumer Price Index for a year	172.2
r	Annual inflation rate	3 percent
n	Number of years	20

Causes of inflation:

Economists classify the causes into different categories. Demand-pull inflation occurs when spending exceeds an economy's production capacity. Cost-push inflation is caused by sudden increases in input costs such as oil or wages.

Another type is endogenous inflation. This occurs when people expect prices to rise and adjust their wages and prices accordingly, creating a cycle. Monetarists believe that rapid increases in the money supply promote inflation because more money chases the same goods, driving up prices. Most central banks aim to maintain low and stable inflation rates of about two percent rather than zero inflation.

There are other species that you may be familiar with.

Hyperinflation is an extreme condition in which prices rise out of control, as happened in Germany in the 1920s and recently in Venezuela. Deflation, on the other hand, is the opposite - a sustained fall in prices. If people postpone their purchases, it can lead to stagnation in the economy.

A slowdown in inflation simply means that the rate of inflation is falling while prices are still rising. Stagflation is an adverse combination of high inflation and weak economic growth.

The effects of inflation on capital

As prices rise around us, the actual value of cash that is not spent decreases. People with fixed incomes or long-term savings are most affected because they can buy less each year for the same amount.

Borrowers could benefit as the currency they use to repay their loans may be worth slightly less than when they borrowed it. Assets whose prices tend to rise, such as stocks, real estate and inflation-protected bonds (TIPS), are often used to maintain purchasing power.

How to deal with it

The nominal value is the central value. It tells you what your amount would be worth in another year. The total inflation rate shows how much prices have changed overall while the average annual interest rate turns that change into a yearly figure, making it easier to compare over different periods of time.

Purchasing power loss is another way of looking at the same change. If prices rise fifty percent for example, a fixed amount will lose about one-third of its purchasing power. The loss gets larger and is based on higher later amounts.

This calculator is for general educational and planning purposes only. The index data are annual averages and are examples only; they are not official figures for particular months. For decisions that depend on exact values, please consult the primary data provided by national statistical authorities.

Frequently asked questions

How does the inflation calculator work?: It compares the value of a currency at two different points in time. If you use actual price data, multiply your amount by the ratio of consumer price indices for the two years. If you use a fixed interest rate, increase the amount each year according to that interest rate.
What inflation rate should I use for my calculations?: In the US and many developed economies, the long term average is about three percent, with central banks generally targeting around two percent. Pick a value that's appropriate for the time period and country you're looking at.
What is the difference between overall inflation and average inflation?: The total inflation rate or cumulative inflation indicates how much prices have risen over a certain period of time. The average annual interest rate is the constant interest rate per year that would produce the same overall return after several years with yearly compounding.
Why is loss of purchasing power lower than inflation rate?: Inflation measures price increases in smaller amounts over earlier times; whereas loss of purchasing power is measured in larger amounts over later times. For example, if prices rise by fifty percent, then the purchasing power will fall by about one third.
What is deflation?: Deflation is the opposite of inflation and describes a general decrease in prices. In a calculator it is represented by a negative average rate of inflation. It occurs when a later price index is below an earlier one.

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Appreciation CalculatorProject the future value of an appreciating asset with compound growth, then solve for the starting value, rate, or years. Includes inflation adjustment, tax on the gain, a sensitivity band, and profit and return metrics.

GDP Deflator CalculatorCalculate the GDP deflator, nominal GDP, or real GDP from the price-index formula, with magnitude scales, a two-period inflation rate, and a real-versus-inflation breakdown.

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Disclaimer: This calculator is provided for general informational and educational purposes only. Our calculators are under active development, and results may be inaccurate, incomplete, or unsuitable for your situation. Always verify the figures independently and seek advice from a qualified professional before relying on them. We make no warranties and accept no liability for any loss or decision arising from use of this tool.

References

U.S. Bureau of Labor Statistics: Consumer Price Index
Official CPI data, methods, and monthly releases.
Investopedia: Inflation
Definition, causes, types, and effects of inflation.