Inflation Calculator

Inflation is the rate at which the general level of prices for goods and services rises over time, which means each unit of currency buys a little less than it did before. A modest, steady level of inflation is normal and even considered healthy for an economy, but it has a profound effect on the value of money over long periods.

Inflation is most commonly measured by the Consumer Price Index (CPI), which tracks the average price of a representative "basket" of goods and services — housing, food, transportation, healthcare, and more. When the CPI rises, the cost of that basket has gone up, and your money's purchasing power has fallen. Comparing the CPI between two years gives the cumulative inflation over that span; this calculator uses official US CPI data stretching back to 1913.

The long-run effect is striking. At an average of around 3% per year, prices roughly double every 24 years. That's why a sum that felt substantial decades ago seems small today, and why salaries, rents and grocery bills are so much higher than they were a generation ago — not necessarily because we are richer or poorer, but because the measuring stick itself has shrunk.

Inflation matters for nearly every financial decision. For savers, it sets the bar that your returns must clear: money earning less than the inflation rate is quietly losing value even as the balance grows. For borrowers, inflation can be a mild benefit, since fixed-rate debt is repaid with money that's worth less over time. For retirees on fixed incomes, inflation is a serious risk, gradually eroding the buying power of pensions and savings.

Central banks — the Federal Reserve in the US, the Bank of England in the UK — typically target around 2% annual inflation, raising or lowering interest rates to keep it stable. Periods of high inflation, like the early 1980s or the early 2020s, sharply increase the cost of living. Understanding inflation helps you set realistic return targets, plan for retirement and put historical prices and incomes into proper perspective.