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Inflation Calculator

4.5 (4,234 reviews)
🔥 Popular ✓ Free Updated February 15, 2026

Calculate how inflation affects your money's purchasing power over time. Use our inflation calculator to see what a dollar was worth in any year from 1913 to today, project future value, compare costs across decades, and understand how the CPI (Consumer Price Index) impacts your savings and investments.

🎯

Quick Answer: How Does Inflation Affect the Value of Money?

Inflation reduces your money's purchasing power over time. The average US inflation rate since 1913 has been approximately 3.3% per year, meaning $1 in 1913 would need about $32 today to have the same buying power.

  1. $100 in 1990 → Worth approximately $250 in 2025 (150% cumulative inflation)
  2. $100 in 2000 → Worth approximately $185 in 2025 (85% cumulative inflation)
  3. $100 in 2010 → Worth approximately $145 in 2025 (45% cumulative inflation)
  4. $100 in 2020 → Worth approximately $122 in 2025 (22% cumulative inflation)
  5. Current rate: ~2.7% annual inflation (as of late 2025)
Example: If you saved $10,000 in 2000 and it earned 0% interest, you would need approximately $18,500 today to have the same purchasing power — that is an 85% loss in real value!
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Historical Inflation Calculator
Calculate what a dollar amount from the past is worth today, or vice versa
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Quick Examples:
Future Value Projection
Estimate how much money you will need in the future to maintain today's purchasing power
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0% 2% (Fed Target) 3.3% (Historical Avg) 10%
Use Rate Preset:
Compare Purchasing Power Across Years
See how the same amount of money compares across different time periods
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Quick Comparisons:
Calculate Inflation Rate
Find the inflation rate between two prices or between two years
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📖 How to Use This Inflation Calculator

Our inflation calculator offers four powerful tools to help you understand how prices and purchasing power change over time. Here is how to use each one effectively:

1

Historical Value Calculator

Enter any dollar amount and two years to see how inflation has affected its value. Use the "Direction" dropdown to either adjust a past amount to today's dollars, or see what today's amount was worth in the past.

2

Future Value Projection

Plan for the future by entering today's amount and how many years ahead you want to project. Adjust the inflation rate slider to see different scenarios — use 2% for the Fed's target rate, or 3.3% for the historical average.

3

Compare Years

Compare purchasing power across up to four different years simultaneously. This is great for understanding generational wealth changes or comparing economic eras.

4

Inflation Rate Calculator

Calculate the inflation rate from two prices (like how much a product cost then vs. now), or find the actual CPI-based inflation between any two years.

💡 Pro Tip

All calculations use official CPI (Consumer Price Index) data from the Bureau of Labor Statistics when available. For future projections, we use your specified rate. Historical data covers 1913 to present, when modern CPI methodology began.

📚 What Is Inflation? A Complete Guide

Inflation is the rate at which the general level of prices for goods and services rises over time, causing the purchasing power of currency to decline. When inflation occurs, each unit of currency buys fewer goods and services than it did before. Understanding inflation is crucial for making informed financial decisions, from everyday budgeting to long-term retirement planning.

The Bureau of Labor Statistics (BLS) measures inflation in the United States primarily through the Consumer Price Index (CPI), which tracks the average change in prices paid by urban consumers for a basket of goods and services including food, housing, transportation, medical care, education, and recreation.

🔑 Key Inflation Facts

  • The Federal Reserve targets 2% annual inflation as optimal for economic stability
  • Average US inflation since 1913 has been approximately 3.3% per year
  • The highest recorded US inflation was 23.7% in June 1920
  • The most recent inflation peak was 9.1% in June 2022
  • $1 in 1913 has the purchasing power of approximately $32 today

Types of Inflation

📈

Demand-Pull Inflation

Occurs when demand for goods and services exceeds supply. More money chasing the same amount of goods drives prices up. Common during economic booms.

🏭

Cost-Push Inflation

Happens when production costs rise (wages, raw materials, energy), forcing businesses to raise prices. Oil price shocks are a classic example.

💵

Monetary Inflation

Results from expansion of the money supply. When more money circulates in the economy, each dollar becomes worth less in purchasing power.

🌍

Built-In Inflation

A self-perpetuating cycle where workers demand higher wages to keep up with rising prices, which then causes businesses to raise prices further.

🔢 How to Calculate Inflation: The Formula Explained

Understanding the inflation formula helps you accurately measure how prices change over time. There are several ways to calculate inflation depending on what data you have available.

Basic Inflation Rate Formula

Inflation Rate = ((CPI₂ - CPI₁) / CPI₁) × 100

Where CPI₁ is the Consumer Price Index in the starting period and CPI₂ is the CPI in the ending period.

📝 Example Calculation

Let us calculate inflation between 2015 and 2025:

  • CPI in January 2015: 233.707
  • CPI in January 2025: 317.671 (estimated)
  • Inflation = ((317.671 - 233.707) / 233.707) × 100 = 35.9%

This means prices rose by 35.9% over that 10-year period, or roughly 3.1% per year on average.

Adjusting Dollar Values for Inflation

Adjusted Value = Original Value × (CPI₂ / CPI₁)

To convert a past dollar amount to today's dollars, multiply by the ratio of current CPI to historical CPI.

Average Annual Inflation Rate (CAGR)

Annual Rate = ((CPI₂ / CPI₁)^(1/n) - 1) × 100

Where n is the number of years. This gives you the compound annual growth rate of inflation.

Future Value with Inflation

Future Value = Present Value × (1 + r)^n

Where r is the annual inflation rate (as a decimal) and n is the number of years. This projects how much money you will need in the future.

📊 Understanding CPI Components

The CPI basket includes weighted categories:

  • Housing (42.4%) – Rent, owner's equivalent rent, utilities
  • Food (13.5%) – Groceries and dining out
  • Transportation (15.4%) – Vehicles, gas, public transit
  • Medical Care (8.1%) – Insurance, services, drugs
  • Education & Communication (6.2%) – Tuition, phone, internet
  • Recreation (5.6%) – Entertainment, hobbies
  • Other (8.8%) – Apparel, personal care, miscellaneous

📅 Historical US Inflation Rates: A Century of Data

Understanding historical inflation patterns helps put current economic conditions in perspective and aids in financial planning. The United States has experienced various inflation environments over the past century, from deflationary periods during the Great Depression to high inflation in the 1970s and early 1980s.

Era Years Avg. Annual Inflation Key Events
World War I1914-192014.6%War spending, supply shortages
Roaring Twenties1921-1929-0.4%Post-war deflation, prosperity
Great Depression1930-1939-2.0%Deflation, economic collapse
World War II1940-19455.1%War production, price controls
Post-War Boom1946-19652.6%Economic growth, stability
Vietnam/Oil Crisis1966-19827.0%Oil embargo, stagflation
Great Moderation1983-20073.0%Fed targeting, globalization
Financial Crisis2008-20201.7%Low rates, slow growth
Post-COVID2021-20235.7%Supply chains, stimulus
Recent2024-2025~2.7%Normalization, Fed tightening

Notable Inflation Spikes in US History

📈 1970s Stagflation (Peak: 14.8%)

  • Oil embargo quadrupled gas prices
  • Wage-price spiral took hold
  • Fed Chairman Volcker raised rates to 20%
  • Prime rate hit 21.5% in 1980

📈 2021-2022 Surge (Peak: 9.1%)

  • COVID supply chain disruptions
  • $5+ trillion in fiscal stimulus
  • Energy price spikes
  • Fed raised rates from 0% to 5.5%
$1 → $32+
The purchasing power change of the US dollar from 1913 to 2025 — a 97% loss in value over 112 years

💰 How Inflation Affects Your Money and Finances

Inflation impacts virtually every aspect of your financial life. Understanding these effects helps you make better decisions about spending, saving, investing, and planning for the future.

The Silent Wealth Destroyer

Inflation is often called a "silent tax" or "invisible thief" because it gradually erodes your purchasing power without you necessarily noticing day-to-day. At just 3% annual inflation, your money loses half its purchasing power in about 24 years.

Inflation Rate Years to Lose 25% Years to Lose 50% Years to Lose 75%
2%14 years35 years69 years
3%9 years23 years46 years
4%7 years17 years35 years
5%6 years14 years28 years
7%4 years10 years20 years

Impacts on Different Financial Areas

🏦

Savings Accounts

If your savings earn 1% but inflation is 3%, you are losing 2% of real purchasing power annually. High-yield savings accounts help but rarely beat inflation.

🏠

Real Estate

Property values typically rise with inflation, making real estate a traditional hedge. Fixed-rate mortgages benefit borrowers as they repay with cheaper dollars.

📈

Investments

Stocks historically outpace inflation long-term (~7% real returns). Bonds suffer during high inflation. TIPS and I-Bonds provide inflation protection.

👴

Retirement

A 30-year retirement at 3% inflation means your money needs to buy 2.4x more at the end. Social Security has COLA adjustments; pensions often do not.

💳

Debt

Fixed-rate debt becomes cheaper to repay over time as inflation erodes the real value. Variable-rate debt rises with interest rates when Fed fights inflation.

💼

Wages

If your salary does not keep pace with inflation, you are taking a real pay cut. Negotiate raises of at least inflation rate to maintain purchasing power.

⚠️ The Retirement Planning Challenge

If you need $50,000/year to retire today and plan to retire in 25 years, you will actually need about $104,689/year at just 3% inflation — more than double! This is why retirement calculators always factor in inflation when projecting your needs.

🛡️ How to Protect Your Money from Inflation

While you cannot avoid inflation entirely, you can take strategic steps to minimize its impact on your wealth. The key is ensuring your assets grow faster than inflation erodes their purchasing power.

Investment Strategies That Beat Inflation

1

Stock Market Investing

Historically, the S&P 500 has returned approximately 10% annually (about 7% after inflation). Broad market index funds provide diversified exposure to equities that tend to grow with the economy.

2

Treasury Inflation-Protected Securities (TIPS)

TIPS are US government bonds whose principal adjusts with CPI. You are guaranteed to keep pace with inflation, making them ideal for conservative investors seeking protection.

3

Series I Savings Bonds (I-Bonds)

I-Bonds earn interest composed of a fixed rate plus an inflation rate tied to CPI. Currently paying 3.98% (as of May 2025). Purchase limit of $10,000 per year per person via TreasuryDirect.gov.

4

Real Estate Investment

Property values and rents typically rise with inflation. REITs (Real Estate Investment Trusts) offer a liquid way to invest in real estate without buying physical property.

5

Commodities and Precious Metals

Gold, silver, and commodities often perform well during high inflation. They can serve as a hedge but are more volatile. Consider commodity ETFs for easier access.

Inflation Protection by Risk Level

🟢 Low Risk

  • I-Bonds (inflation-adjusted, guaranteed)
  • TIPS (government-backed)
  • High-yield savings (beats some inflation)
  • Short-term CDs when rates are high

🟡 Moderate Risk

  • Dividend stocks (income + growth)
  • REITs (real estate exposure)
  • Balanced mutual funds
  • Corporate bonds (investment grade)

🔴 Higher Risk (Higher Potential)

  • Growth stocks (tech, innovation)
  • Small-cap stocks
  • Commodities and gold
  • International/emerging markets

💡 The 60/40 Rule Evolved

The traditional 60% stocks / 40% bonds allocation may not be optimal during high inflation periods because bonds lose value when interest rates rise. Consider adding TIPS, commodities, or real estate to your bond allocation for better inflation protection.

🎯 Practical Steps to Take Today

  • Open a high-yield savings account (currently 4-5% APY) for emergency funds
  • Buy I-Bonds up to the $10,000 annual limit at TreasuryDirect.gov
  • Maximize 401(k) and IRA contributions for tax-advantaged growth
  • Negotiate annual raises of at least 3-4% to maintain purchasing power
  • Consider refinancing variable-rate debt to fixed-rate loans
  • Review and rebalance your investment portfolio annually

❌ Common Inflation Calculation Mistakes to Avoid

Accurately understanding inflation requires avoiding several common errors that can lead to flawed financial decisions. Here are the most frequent mistakes people make when calculating or interpreting inflation:

🔢

Using Simple vs. Compound

Do not multiply inflation rate by years. 3% for 10 years is not 30% — it is 34.4% due to compounding. Always use the compound formula: (1 + r)^n.

📊

Ignoring Category Differences

CPI is an average. Healthcare inflates at 5-6%, education at 4-5%, while electronics often deflate. Your personal inflation may differ significantly.

📅

Using Wrong Time Periods

CPI data is monthly-specific. Using annual averages instead of month-to-month comparisons can give different results. Be consistent with your data sources.

🌍

Mixing Regional Data

US CPI differs from UK RPI, EU HICP, etc. Regional CPI (NYC vs. rural) also varies significantly. Use location-appropriate indices.

⚠️ The "Real Return" Mistake

Many investors calculate real returns incorrectly by simple subtraction. If your investment returned 8% and inflation was 3%, your real return is NOT 5%. The correct calculation is: ((1 + 0.08) / (1 + 0.03) - 1) × 100 = 4.85%. While the difference seems small, it compounds significantly over time.

Personal Inflation Rate Calculation

The CPI represents an average household, but your spending patterns may differ significantly. Someone who spends more on healthcare and housing will experience higher personal inflation than someone who spends more on electronics and recreation.

📝 Calculate Your Personal Inflation Rate

Track these categories monthly and compare year-over-year:

  • Housing: Rent/mortgage, utilities, maintenance
  • Transportation: Gas, car payment, insurance, repairs
  • Food: Groceries, dining out
  • Healthcare: Insurance premiums, medications, visits
  • Entertainment: Subscriptions, hobbies, travel

Weight each by your actual spending percentage, then calculate your personal inflation.

🏛️ The Federal Reserve and Inflation Control

The Federal Reserve (the Fed) plays a central role in managing inflation in the United States. Understanding how the Fed influences inflation helps you anticipate changes in interest rates, savings yields, and economic conditions.

📌 The Fed's Dual Mandate

Congress has given the Federal Reserve two primary goals:

  • Maximum Employment: Keep unemployment as low as sustainably possible
  • Price Stability: Maintain inflation at approximately 2% annually

These goals can sometimes conflict — fighting inflation may slow employment, and stimulating jobs may increase inflation.

How the Fed Controls Inflation

1

Federal Funds Rate

The Fed's primary tool. Higher rates make borrowing more expensive, reducing spending and slowing inflation. Lower rates stimulate borrowing and economic activity. The current target range affects everything from mortgages to savings accounts.

2

Open Market Operations

The Fed buys or sells Treasury securities to adjust the money supply. Buying securities injects money (stimulative); selling removes money (contractionary).

3

Quantitative Easing/Tightening

During crises, the Fed may buy bonds and other assets to inject liquidity. Quantitative tightening does the opposite, reducing the money supply by letting bonds mature without reinvestment.

4

Forward Guidance

The Fed communicates future policy intentions to shape market expectations. If markets expect rate hikes, they often tighten on their own, helping the Fed achieve its goals.

Recent Fed Actions Timeline

Period Fed Funds Rate Action Inflation Context
March 20200-0.25%Emergency cut to zeroCOVID-19 emergency
2020-20210-0.25%Held near zero + QEStimulus support
March 20220.25-0.50%First rate hikeInflation reaching 8%+
June 20221.50-1.75%75bp hikes beginInflation peaked at 9.1%
July 20235.25-5.50%Final hike (for now)Inflation falling to 3%
Sept 20244.75-5.00%First cut in cycleInflation normalizing
Dec 20254.25-4.50%Gradual cuts continueNear 2% target

💡 What This Means for You

  • Higher rates: Better savings yields, higher mortgage/loan rates, stock market may struggle
  • Lower rates: Lower savings yields, easier borrowing, stock market typically rises
  • Watch Fed meetings: 8 FOMC meetings per year can move markets significantly

⚖️ Inflation vs. Deflation: Understanding the Difference

While inflation receives more attention, deflation (falling prices) can be equally or even more damaging to an economy. Understanding both helps you navigate different economic environments.

📈 Inflation (Rising Prices)

  • Prices increase over time
  • Purchasing power decreases
  • Encourages spending now vs. later
  • Debtors benefit (repay with cheaper dollars)
  • Central banks raise interest rates to combat
  • Moderate inflation (2-3%) is considered healthy

📉 Deflation (Falling Prices)

  • Prices decrease over time
  • Purchasing power increases
  • Encourages delaying purchases
  • Creditors benefit (repaid with stronger dollars)
  • Central banks lower rates to combat
  • Can lead to economic stagnation (deflationary spiral)

Key Inflation-Related Terms

📊

Disinflation

A slowdown in the rate of inflation — prices still rise but more slowly. This is what happened in 2023-2024 as inflation fell from 9% toward 3%.

🔥

Hyperinflation

Extremely rapid inflation (50%+ per month). Destroys currency value. Historical examples: Germany 1923, Zimbabwe 2008, Venezuela 2018.

🐌

Stagflation

High inflation combined with high unemployment and stagnant growth. The worst of both worlds. Characterized the 1970s US economy.

🎯

Core Inflation

CPI excluding volatile food and energy prices. Gives a clearer picture of underlying inflation trends. The Fed focuses heavily on this measure.

📌 Why the Fed Targets 2% Inflation (Not 0%)

Zero inflation sounds ideal, but it is actually risky because:

  • Small measurement errors could mean actual deflation
  • Wages are "sticky" — employers avoid cutting nominal wages, causing unemployment in deflation
  • Low inflation gives the Fed room to cut rates during recessions (cannot cut below zero effectively)
  • Moderate inflation encourages spending and investment rather than hoarding cash

🌍 Global Inflation: How the US Compares

Inflation is a global phenomenon, but rates vary significantly between countries based on monetary policy, economic structure, and local factors. Comparing US inflation to other major economies provides valuable perspective.

Country/Region 2024 Inflation Central Bank Target Key Rate
🇺🇸 United States2.9%2%4.25-4.50%
🇪🇺 Eurozone2.4%2%3.00%
🇬🇧 United Kingdom2.6%2%4.75%
🇯🇵 Japan2.8%2%0.25%
🇨🇦 Canada2.0%2%3.25%
🇦🇺 Australia2.8%2-3%4.35%
🇨🇭 Switzerland1.1%<2%0.50%
🇧🇷 Brazil4.8%3%12.25%
🇮🇳 India5.5%4%6.50%
🇹🇷 Turkey44%5%45.00%

💡 Why Rates Differ So Much

  • Monetary policy independence: Some countries have more hawkish or dovish central banks
  • Currency strength: Weaker currencies import inflation (everything costs more in local terms)
  • Energy dependence: Countries reliant on energy imports suffer more from oil price spikes
  • Economic structure: Emerging markets often have higher baseline inflation
  • Government debt: High debt may tempt governments to inflate their way out

❓ People Also Ask About Inflation

What is a good inflation rate?

Most economists and central banks consider 2% annual inflation to be optimal. This rate is low enough to maintain price stability and purchasing power, but high enough to prevent deflation and give central banks room to stimulate the economy during recessions by cutting interest rates. The Federal Reserve explicitly targets 2% as measured by the PCE (Personal Consumption Expenditures) index.

How much has inflation increased since 2020?

From January 2020 to late 2025, cumulative inflation in the US has been approximately 22-25%. This means something that cost $100 in early 2020 now costs around $122-125. The bulk of this inflation occurred in 2021-2022, with the annual rate peaking at 9.1% in June 2022 before declining toward the Fed's 2% target.

Why does the government want inflation?

Moderate inflation serves several purposes: it encourages spending (why save if money loses value?), reduces real debt burdens (government debt becomes easier to repay with cheaper dollars), allows wage flexibility (easier to give smaller raises than cut wages), and gives monetary policy room to cut rates during recessions. Zero inflation risks tipping into deflation, which is historically harder to escape.

What happens to my savings during inflation?

Inflation erodes the real value (purchasing power) of cash savings. If you have $10,000 earning 1% in a savings account and inflation is 3%, you lose 2% of real purchasing power annually — about $200 in real terms. To protect savings, you need investments that outpace inflation, such as stocks, TIPS, I-Bonds, or real estate.

Is inflation good for homeowners?

Yes, generally. Homeowners with fixed-rate mortgages benefit because: (1) they repay loans with dollars that are worth less over time, (2) home values typically rise with inflation, building equity, and (3) rents rise, making ownership more attractive. However, rising interest rates (used to fight inflation) make refinancing and home buying more expensive.

How do I calculate inflation between two years?

Use the formula: ((CPI₂ - CPI₁) / CPI₁) × 100 where CPI₁ is the Consumer Price Index in the starting year and CPI₂ is in the ending year. For example, CPI was 172.2 in 2000 and 308.7 in 2024. Inflation = ((308.7 - 172.2) / 172.2) × 100 = 79.3% cumulative inflation over 24 years.

What is the Rule of 72 for inflation?

The Rule of 72 is a quick way to estimate how long it takes for prices to double (or purchasing power to halve). Simply divide 72 by the inflation rate. At 3% inflation, prices double in about 24 years (72÷3). At 6% inflation, prices double in 12 years. It is the same formula used for investment growth but applied to purchasing power erosion.

Are I-Bonds a good inflation hedge?

Yes, I-Bonds are one of the best inflation hedges available. Their interest rate adjusts with CPI every 6 months, guaranteeing you keep pace with inflation. They are backed by the US government (virtually no default risk), exempt from state/local taxes, and can defer federal taxes. The main drawbacks are the $10,000 annual purchase limit and 1-year lockup period.

📋 Frequently Asked Questions About Inflation

What is the current US inflation rate?

As of late 2025, the US inflation rate is approximately 2.7% year-over-year based on the Consumer Price Index (CPI) published by the Bureau of Labor Statistics. This is down significantly from the peak of 9.1% in June 2022 and approaching the Federal Reserve's 2% target. Core inflation (excluding food and energy) remains slightly higher at around 3.3%. Check BLS.gov for the most current monthly data.

How accurate is this inflation calculator?

Our calculator uses official CPI-U (Consumer Price Index for All Urban Consumers) data from the Bureau of Labor Statistics for historical calculations, making it highly accurate for general purchasing power comparisons. However, remember that CPI represents average urban consumer spending — your personal inflation may differ based on your spending patterns. For future projections, accuracy depends on the inflation rate assumption you choose.

Why do some prices rise faster than inflation?

CPI is a weighted average of many categories. Some sectors consistently outpace overall inflation: healthcare (limited competition, aging population), education (reduced state funding, demand growth), housing in certain markets (supply constraints, population shifts), and childcare (labor-intensive). Meanwhile, technology products often see deflation due to rapid innovation and manufacturing efficiencies. Your "personal inflation rate" depends on your specific spending mix.

What caused the 2021-2022 inflation spike?

Multiple factors converged: (1) COVID-19 supply chain disruptions limited production while demand recovered, (2) over $5 trillion in fiscal stimulus increased consumer spending power, (3) the Fed kept rates at zero and purchased bonds (quantitative easing), (4) labor shortages pushed wages higher, (5) Russia's invasion of Ukraine spiked energy and food prices globally. Economists debate the relative contribution of each factor, but most agree it was a "perfect storm" of demand-pull and cost-push inflation.

How does inflation affect Social Security?

Social Security benefits receive annual Cost-of-Living Adjustments (COLAs) based on CPI-W (Consumer Price Index for Urban Wage Earners). When inflation rises, benefits increase the following year. For example, the 2023 COLA was 8.7% (the highest since 1981) following 2022's high inflation. The 2024 COLA was 3.2%, and 2025's is 2.5%. This automatic adjustment helps retirees maintain purchasing power, though critics argue CPI-W underestimates senior-specific costs like healthcare.

Should I pay off debt or invest during inflation?

It depends on your debt type and interest rates. Fixed-rate debt (like a 3% mortgage) benefits from inflation — you repay with cheaper dollars while your home appreciates. High-interest debt (credit cards at 20%+) should always be paid off first since no investment reliably beats that rate. During high inflation periods, variable-rate debt becomes more expensive as the Fed raises rates. Generally: pay off high-interest debt first, maintain fixed-rate debt, and invest the difference in inflation-beating assets.

What is the difference between CPI and PCE inflation?

Both measure inflation but differently. CPI (Consumer Price Index) from the BLS measures out-of-pocket spending by urban households with a fixed basket. PCE (Personal Consumption Expenditures) from the BEA includes all goods/services consumed (including those paid by employers/government like health insurance) with a dynamic basket that adjusts for substitution. The Fed officially targets PCE inflation, which typically runs 0.3-0.5% lower than CPI. Both are valid measures for different purposes.

Can inflation ever be negative?

Yes, negative inflation is called deflation. It occurred during the Great Depression (1930-1933, averaging -6.7% annually), briefly during the 2008-2009 financial crisis, and in Japan's "Lost Decade" (1990s-2000s). While falling prices sound good, deflation is dangerous: consumers delay purchases expecting lower prices, businesses cut production and jobs, debt becomes harder to repay in real terms, and a deflationary spiral can entrench economic stagnation. The Fed works hard to prevent sustained deflation.

How much should I save for retirement accounting for inflation?

A common rule: multiply your desired annual retirement income by 25-30 (the "4% rule" inverse), then adjust for future inflation. If you need $60,000/year in today's dollars and retire in 25 years, at 3% inflation you will need about $125,000/year. Your nest egg should be roughly $3.1 million. Most retirement calculators factor in inflation automatically. The key is investing in assets that historically beat inflation (stocks, real estate) rather than keeping money in low-yield savings accounts.

Why has the dollar lost 97% of its value since 1913?

This reflects over a century of compound inflation averaging about 3.3% annually. Key factors: abandonment of the gold standard (1933/1971) allowed flexible money supply expansion, two World Wars required massive government spending, economic growth required more currency, and deliberate Fed policy targets positive inflation. However, nominal wages and asset values have also risen dramatically. A worker earning $500/year in 1913 would find today's $50,000+ salaries unimaginable. The dollar's "loss" is offset by overall economic growth and rising incomes.

✓ Expert Reviewed

This inflation calculator and guide has been developed using official Consumer Price Index (CPI) data from the Bureau of Labor Statistics and economic research from Federal Reserve publications. Our calculations follow standard inflation adjustment methodologies used by economists and financial professionals.

The information provided is for educational purposes. For personalized financial advice, consult with a qualified financial advisor or economist.

Data Sources: Bureau of Labor Statistics (CPI), Federal Reserve Economic Data (FRED), U.S. Treasury Department (I-Bonds, TIPS)

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