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Inflation Rate Calculator

Inflation Rate Calculator

Section titled “Inflation Rate Calculator”

Calculate inflation rates between any two years and understand how prices change over time with accurate percentage calculations and historical comparisons.

%
yrs

Use Cases

Section titled “Use Cases”

This inflation rate calculator helps economists analyze price trends, researchers study historical inflation periods, businesses plan pricing strategies, investors adjust return expectations, and policy makers evaluate economic conditions.

What is Inflation Rate?

Section titled “What is Inflation Rate?”

The inflation rate is the percentage increase in the general price level of goods and services over a specific period, typically measured annually. It shows how much faster prices are rising year-over-year.

Inflation Rate Formula

Section titled “Inflation Rate Formula”

Calculating the inflation rate between two periods:

Inflation Rate=(CPIend−CPIstartCPIstart)×100%\text{Inflation Rate} = \left(\frac{\text{CPI}_{\text{end}} - \text{CPI}_{\text{start}}}{\text{CPI}_{\text{start}}}\right) \times 100\%

Where:

  • CPIend\text{CPI}_{\text{end}} = Consumer Price Index at end period
  • CPIstart\text{CPI}_{\text{start}} = Consumer Price Index at start period

Alternative Formula (Using Prices):

Inflation Rate=(Pricecurrent−PricepastPricepast)×100%\text{Inflation Rate} = \left(\frac{\text{Price}_{\text{current}} - \text{Price}_{\text{past}}}{\text{Price}_{\text{past}}}\right) \times 100\%

Math.js Expression:

price_2020 = 100;
price_2025 = 115.93;


inflation_rate = ((price_2025 - price_2020) / price_2020) * 100;
inflation_rate  # 15.93%

Average Annual Inflation Rate

Section titled “Average Annual Inflation Rate”

For calculating average inflation over multiple years:

Average Annual Rate=[(PriceendPricestart)1n−1]×100%\text{Average Annual Rate} = \left[\left(\frac{\text{Price}_{\text{end}}}{\text{Price}_{\text{start}}}\right)^{\frac{1}{n}} - 1\right] \times 100\%

Where nn = number of years

Math.js Expression:

price_start = 100;
price_end = 115.93;
years = 5;


average_annual_rate = ((price_end / price_start)^(1 / years) - 1) * 100;
average_annual_rate  # 3.0% per year

Example Calculation

Section titled “Example Calculation”

Scenario: Calculate Inflation Rate 2020-2025

  • 2020 Price Index: 100
  • 2025 Price Index: 115.93
  • Period: 5 years

Step 1: Calculate Total Inflation

cpi_2020 = 100;
cpi_2025 = 115.93;


total_inflation = ((cpi_2025 - cpi_2020) / cpi_2020) * 100;
total_inflation  # 15.93%

Step 2: Calculate Average Annual Rate

average_rate = ((cpi_2025 / cpi_2020)^(1/5) - 1) * 100;
average_rate  # 3.0% per year

Interpretation: Prices increased 15.93% total over 5 years, averaging 3.0% annually.

Historical U.S. Inflation Rates

Section titled “Historical U.S. Inflation Rates”
PeriodAverage Annual Inflation
2020-2025~3.5%
2010-20201.8%
2000-20102.6%
1990-20003.0%
1980-19905.6%
1970-19807.4% (stagflation)
1960-19702.5%

Federal Reserve target: ~2% annual inflation

Inflation Rate by Category (2024 Example)

Section titled “Inflation Rate by Category (2024 Example)”
CategoryAnnual Inflation Rate
Food3.5%
Energy5.2%
Housing4.8%
Transportation3.9%
Medical Care2.7%
Education3.1%
Overall CPI3.4%

Examples

Section titled “Examples”
  • Price increase from 100to100 to 120 = 20% inflation rate
  • CPI rise from 250 to 275 over 5 years = 10% total (1.92% annual average)
  • 50,000salaryto50,000 salary to 55,000 in 3 years = 10% increase (3.23% annual)
  • Price doubling from 10to10 to 20 = 100% inflation rate

Causes of Inflation

Section titled “Causes of Inflation”

Demand-Pull Inflation

Section titled “Demand-Pull Inflation”

Occurs when aggregate demand exceeds supply. High consumer spending, government spending, or investment drives prices up.

Cost-Push Inflation

Section titled “Cost-Push Inflation”

Results from increased production costs (wages, raw materials, energy). Businesses pass higher costs to consumers.

Monetary Inflation

Section titled “Monetary Inflation”

Too much money supply chasing too few goods. Central bank policies increasing money supply can trigger inflation.

Built-In Inflation

Section titled “Built-In Inflation”

Wage-price spiral where workers demand higher wages, businesses raise prices, creating a self-reinforcing cycle.

Common Mistakes & Tips

Section titled “Common Mistakes & Tips”

Confusing Nominal vs Real Values: Inflation rates measure nominal price changes. Always adjust for inflation when comparing values across different years.

Using Simple Average Instead of Geometric: For multi-year periods, use geometric mean (compound rate), not arithmetic average, for accurate annualized inflation.

Ignoring Category Differences: Overall inflation doesn’t reflect your personal inflation. Track categories matching your spending (housing, food, healthcare).

Forgetting Compounding: 3% inflation for 10 years isn’t 30% total—it’s 34.39% due to compounding effects.

Comparing Different Indexes: CPI, PCE, and GDP deflator measure inflation differently. Use consistent indexes for meaningful comparisons.

Frequently Asked Questions

Section titled “Frequently Asked Questions”

How is the inflation rate calculated?

Section titled “How is the inflation rate calculated?”

Inflation rate is calculated by comparing price levels between two periods: ((Current Price - Past Price) / Past Price) × 100%. Government agencies use CPI surveys of thousands of goods.

What’s the difference between CPI and inflation rate?

Section titled “What’s the difference between CPI and inflation rate?”

CPI (Consumer Price Index) is the price level measurement. Inflation rate is the percentage change in CPI between periods. CPI is the number, inflation is the rate of change.

Why do different sources show different inflation rates?

Section titled “Why do different sources show different inflation rates?”

Different measures (CPI, PCE, core inflation) track different baskets of goods. CPI includes housing and food; core inflation excludes volatile food/energy; PCE weighs categories differently.

What is a healthy inflation rate?

Section titled “What is a healthy inflation rate?”

Most central banks target 2% annual inflation. This allows economic growth while maintaining price stability. Too low risks deflation; too high erodes purchasing power.

How accurate are inflation rate predictions?

Section titled “How accurate are inflation rate predictions?”

Short-term (1 year) forecasts can be reasonably accurate. Long-term predictions are uncertain due to unpredictable policy changes, economic shocks, and global events.

Can inflation rate be negative?

Section titled “Can inflation rate be negative?”

Yes, negative inflation is called deflation. While it seems beneficial, persistent deflation can harm economies by discouraging spending and investment.

Section titled “Related Calculators”