Inflation Calculator
Calculate the inflation rate between two periods using CPI values, or find the purchasing power of a dollar amount after a given annual inflation rate over time.
How to use this tool
- Enter starting cpi, ending cpi, starting amount and number of years in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your cumulative inflation rate and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Cumulative Inflation Rate: ((CPInew − CPIold) / CPIold) × 100
Equivalent Amount: Amount × (CPInew / CPIold)
Purchasing Power Lost: (1 − CPIold / CPInew) × 100
Average Annual Rate: ((CPInew / CPIold)1/n − 1) × 100
How it works
Inflation is measured by comparing the Consumer Price Index (CPI) across two time periods. The CPI tracks the cost of a representative basket of goods and services over time. The equivalent amount calculation shows how much money you would need today to have the same purchasing power as a given amount in the past. The annual rate is the geometric mean of the cumulative change.
Worked example
CPI rises from 150 to 165 over 5 years on a $1,000 amount
- Cumulative inflation rate = (165 − 150) / 150 × 100 = 10.00%.
- Equivalent amount = $1,000 × (165 / 150) = $1,100.00.
- Purchasing power lost = (1 − 150/165) × 100 = 9.09%.
- Annual inflation rate = (165/150)^(1/5) − 1 = 1.10^0.2 − 1 ≈ 1.92%.
Inflation Rate: 10.00% | Equivalent Amount: $1,100.00 | Annual Rate: 1.92%
Common mistakes to avoid
- Confusing the price level (CPI) with the inflation rate: a CPI of 300 does not mean 300% inflation; it means prices are 3x the base year level. The inflation rate is the percentage change in CPI between two periods.
- Double-compounding by applying an annual inflation rate linearly over multiple years: $1,000 inflated at 3% for 10 years is $1,000 x (1.03)^10 = $1,344, not $1,000 + (10 x $30) = $1,300.
- Treating the CPI as a perfect measure of personal inflation: the CPI reflects an average consumption basket, which may differ significantly from an individual's actual spending mix on housing, healthcare, or education.
Key terms
- What is CPI?
- The Consumer Price Index measures changes in the price level of a weighted average basket of consumer goods and services purchased by households.
- What is purchasing power?
- The value of a currency in terms of the quantity of goods and services one unit of money can buy. Inflation erodes purchasing power over time.
- Why does purchasing power lost differ from inflation rate?
- Inflation rate measures price increase from the old base, while purchasing power lost measures the fraction of value eroded from the new price level — the two are mathematical inverses.
- What is real vs. nominal value?
- Nominal value is expressed in current dollars; real value adjusts for inflation to reflect constant purchasing power.
Frequently asked questions
- What is the difference between inflation and purchasing power?
- Inflation measures the percentage rise in the price level over time. Purchasing power is the inverse: if prices rise 20%, $1 now buys what $0.83 bought before. The two are mathematically linked: Purchasing power ratio = 1 / (1 + inflation rate).
- Which CPI series should I use for the US inflation calculator?
- CPI-U (All Urban Consumers) is the most commonly cited headline inflation index and covers about 93% of the US population. CPI-W (Urban Wage Earners) is used for Social Security COLA adjustments. CPI-U is the standard default for most general inflation calculations.
- How does inflation affect fixed-income investments like bonds?
- Inflation erodes the real value of fixed coupon payments and the principal repaid at maturity. A 5% coupon bond in a 3% inflation environment offers only approximately 2% real return. Treasury Inflation-Protected Securities (TIPS) adjust principal with CPI to preserve real value.