Inflation Calculator

Inflation is calculated using the Consumer Price Index (CPI), which measures the average change in prices paid by consumers for goods and services over time. The formula compares the CPI values between two years to determine how much prices have increased or decreased.

Purchasing power refers to the amount of goods or services you can buy with a unit of currency. When inflation rises, each dollar buys less than it did before, meaning your purchasing power decreases. For example, if inflation is 50% over 10 years, your dollar now has only about 67% of its original purchasing power.

The U.S. Bureau of Labor Statistics began tracking and publishing Consumer Price Index data in 1913. This is when systematic measurement of inflation began in the United States, making it the earliest reliable data available for inflation calculations.

Use a custom inflation rate when you want to project future values or explore hypothetical scenarios. For example, you might use the Federal Reserve's target rate of 2% to estimate future purchasing power, or a higher rate to stress-test your financial planning assumptions.