Inflation Calculator

The CPI calculator above works with annual average values of the CPI for All Urban Consumers (CPI-U), the index the Bureau of Labor Statistics (BLS) has published since 1913. Annual averages smooth out month-to-month swings, so results can differ slightly from calculators that use a single month. With the default inputs, $100 in 2016 has the same buying power as about $130.70 in 2024, a 30.7% rise in prices over eight years.

The flat-rate tools ignore history and assume prices rise by the same percentage every year. They are handy for planning: at 3% inflation, something that costs $100 today will cost about $134.39 in ten years, and $100 today would have bought what cost about $74.41 ten years ago. Try rates of 2% (the Federal Reserve's long-run target), 3% (close to the long-run US average) and higher figures to see the range.

Historical Inflation Rate for the U.S.

The table lists the annual average CPI-U and the percentage change from the previous year's average, calculated from BLS index values. Note that BLS also reports December-to-December changes, which can differ from the annual-average changes shown here.

What is Inflation?

Inflation is a sustained rise in the general level of prices for goods and services, which means each unit of currency buys less over time. If a basket of groceries costs $100 this year and $103 next year, inflation over that year was 3% and a dollar lost about 2.9% of its purchasing power. The opposite, a sustained fall in prices, is deflation. A slowdown in the rate of inflation, when prices still rise but more slowly, is called disinflation.

Moderate, predictable inflation is considered normal in a growing economy. Most central banks, including the Federal Reserve, the European Central Bank and the Bank of England, aim for about 2% a year, measured by their preferred price index. A small positive rate gives central banks room to cut interest rates in a downturn and avoids the dangers of deflation, when consumers delay purchases in the expectation that prices will fall, and debts become harder to repay.

High inflation causes real harm. It erodes the value of cash savings and fixed incomes, makes long-term planning difficult, distorts price signals and tends to hurt lower-income households most, since they spend a larger share of income on necessities. US inflation reached double digits in 1974 and again in 1979–1981, peaking at 13.5% on an annual-average basis in 1980, before the Federal Reserve raised interest rates sharply to bring it down. It stayed mostly between 1% and 4% for the following four decades, then jumped to 4.7% in 2021 and 8.0% in 2022, the highest annual rate since 1981, before easing to 4.1% in 2023 and 2.9% in 2024.

At the extreme is hyperinflation, usually defined as prices rising more than 50% a month. Germany in 1923, Hungary in 1946, Zimbabwe in 2008 and Venezuela in the late 2010s saw currencies become nearly worthless. Hyperinflation almost always follows a government financing large deficits by printing money after a collapse in production or confidence.

Inflation affects everyone differently. Borrowers with fixed-rate debt benefit because they repay with cheaper dollars, while savers and lenders lose unless interest rates keep up. Wages often lag prices during an inflationary burst, which reduces real pay until wage growth catches up.

Why Inflation Occurs?

Economists group the causes of inflation into a few broad types, which often operate together.

Demand-pull inflation happens when total spending in the economy grows faster than the economy's ability to produce goods and services. Strong consumer confidence, rising wages, tax cuts, government spending and easy credit can all boost demand. When businesses cannot keep up, they raise prices. The surge in spending after the pandemic, supported by stimulus payments and low interest rates, is a recent example.

Cost-push inflation starts on the supply side. When the cost of key inputs such as oil, food, raw materials or labor rises, producers pass at least part of the increase on to customers. The oil embargo of 1973 and the Iranian revolution in 1979 sent energy prices soaring and fed the inflation of the 1970s. Supply chain disruptions in 2021 and the energy and food price shock after Russia's invasion of Ukraine in 2022 played a similar role.

Built-in inflation, sometimes called the wage-price spiral, comes from expectations. If workers expect prices to keep rising, they ask for higher wages; businesses facing higher labor costs raise prices; and the expectation proves self-fulfilling. This is why central banks pay close attention to inflation expectations and try to keep them anchored near their target.

Money supply also matters. Over long periods, inflation is closely linked to growth in the money supply relative to economic output, an idea summarized in the monetarist view that too much money chasing too few goods pushes prices up. Central banks influence the money supply and credit conditions mainly through interest rates and the size of their balance sheets.

Other factors include currency depreciation, which raises the price of imports; changes in taxes such as sales or excise taxes; and sector-specific shocks, such as a housing shortage driving up rents, which make up a large share of the CPI.

To fight inflation, a central bank typically raises short-term interest rates, which makes borrowing more expensive, cools spending and investment, and strengthens the currency. The Federal Reserve raised its policy rate from near zero in early 2022 to over 5% by mid-2023 for this reason. Governments can help by reducing deficits or by easing supply constraints.

How is Inflation Calculated?

Inflation is measured by tracking the price of a fixed basket of goods and services over time. Each month, BLS data collectors record prices for about 80,000 items in urban areas across the US, from bread and gasoline to rent, doctor visits and streaming services. Each category is weighted by its share of consumer spending, based on the Consumer Expenditure Surveys, so shelter, food and transportation carry the most weight. The weighted prices are combined into an index set to 100 for the base period of 1982–84.

The inflation rate between two periods is the percentage change in the index: (CPI later − CPI earlier) ÷ CPI earlier × 100. To restate an amount from one year in another year's dollars, multiply it by the ratio of the two index values, which is what the calculator does.

Value in year B = amount × CPI(B) ÷ CPI(A)

CPI(A)

consumer price index in the starting year

CPI(B)

consumer price index in the ending year

Flat-rate tools use future value = amount × (1 + rate)ⁿ and past value = amount ÷ (1 + rate)ⁿ.

Problems with Measuring Inflation

No single number can capture the price changes every household experiences. A family that rents in a fast-growing city, drives long distances and buys no electronics will see very different inflation from a retired homeowner. The CPI measures the average experience of urban consumers, who make up over 90% of the US population, and BLS publishes separate indexes for wage earners (CPI-W), older households (an experimental R-CPI-E) and regions.

Quality changes are hard to price. A new laptop may cost the same as last year's but be far more powerful, so in real terms its price fell. BLS adjusts for this with hedonic methods, but critics argue the adjustments can understate or overstate inflation.

Substitution creates bias too. When beef gets expensive, people buy more chicken. A fixed basket overstates the rise in living costs because it ignores that switch. The chained CPI (C-CPI-U), which BLS also publishes and which is used to index federal tax brackets, accounts for substitution and usually runs a little lower than the CPI-U.

New products and outlets, such as smartphones or discount online retailers, enter the basket with a delay, and housing is especially tricky. The CPI measures homeowners' costs using owners' equivalent rent, an estimate of what an owned home would rent for, rather than home prices or mortgage payments, which some people feel misses the true cost of owning.

Other measures exist for these reasons. The Federal Reserve prefers the Personal Consumption Expenditures (PCE) price index from the Bureau of Economic Analysis, which covers a broader set of spending and adjusts weights more quickly. Core measures exclude food and energy, whose prices swing sharply, to show the underlying trend.

How to Beat Inflation?

Beating inflation means earning a return higher than the rate prices rise, after taxes. Cash in a checking account loses ground every year, so the goal is to put money that is not needed soon into assets that tend to grow faster than prices.

• Stocks: over long periods, US stocks have returned well above inflation, because companies can raise prices and grow earnings. They are volatile year to year, so they suit long-term money.
• Treasury Inflation-Protected Securities (TIPS): US government bonds whose principal adjusts with the CPI, guaranteeing a real return if held to maturity.
• Series I savings bonds: sold by the Treasury, they pay a fixed rate plus an inflation rate that resets every six months. Individuals can buy up to $10,000 a year electronically, and the bonds must be held at least a year.
• Real estate: property values and rents have historically risen with or faster than inflation, and a fixed-rate mortgage becomes cheaper in real terms as prices climb.
• Commodities and real assets: gold, energy and other commodities can rise sharply during inflationary periods, though their long-term returns are uneven and they produce no income.
• High-yield savings, money market funds and short-term Treasury bills: their rates adjust as the central bank raises interest rates, which protects cash better than a traditional savings account.
• Fixed-rate debt: locking in a fixed rate before inflation rises means repaying with less valuable dollars. Variable-rate debt, like credit cards, works the other way and should be paid down.
• Your own earning power: asking for raises that keep up with inflation, building skills and changing jobs when necessary is the most direct protection for most households.
• Spending habits: buying durable goods before expected price increases, buying in bulk and switching to cheaper substitutes can soften the blow of rising prices on a household budget.

Frequently asked questions

Sources

• U.S. Bureau of Labor Statistics – Consumer Price Index
• Federal Reserve – Why does the Federal Reserve aim for 2 percent inflation?
• TreasuryDirect – I Bonds