Inflation Calculator

For long-term planning, 3% is a reasonable baseline based on historical averages. For conservative planning, use 4%. For near-term projections, check current Federal Reserve targets and recent CPI data.

If your savings earn less than inflation, you're losing purchasing power. $10,000 in a 0.5% savings account with 3% inflation loses about $250 in real value annually. You need returns above inflation to maintain purchasing power.

Moderate inflation is intentional policy. Central banks target 2% inflation because it encourages economic activity, allows wages to adjust, and provides buffer against deflation (falling prices), which can be economically devastating.

Subtract the inflation rate from your nominal return. A 10% investment return with 3% inflation gives you about 7% real return. For more precision: Real Return = ((1 + Nominal) / (1 + Inflation)) - 1.

No. CPI is an average basket of goods. Renters face different inflation than homeowners. Families with college-age children face education inflation. Retirees face healthcare inflation. Calculate your personal inflation based on your actual spending.

High inflation favors real assets (stocks, real estate, commodities) over fixed-income investments (bonds, CDs). Keep some inflation protection (TIPS, I Bonds) always, but increase during inflationary periods. Avoid long-term fixed-rate bonds.

CPI (Consumer Price Index) is published by the Bureau of Labor Statistics and uses a fixed basket of goods updated periodically. PCE (Personal Consumption Expenditures) is published by the Bureau of Economic Analysis, has broader coverage, and updates its basket continuously to reflect substitution. The Federal Reserve targets 2% PCE inflation because it tracks consumer behavior more accurately, but PCE typically runs 0.3–0.5 percentage points below CPI.

Headline CPI is a weighted average of a representative basket. If your spending mix differs from that basket — for example, you rent in a hot market, have ongoing medical bills, or pay private school tuition — your real-world inflation can run 1–3 percentage points above CPI. The BLS publishes category-specific indexes (CPI for housing, medical care, education) you can use to build a personal estimate.

Divide 70 (or 72 — both are common) by the annual inflation rate to estimate how many years until prices double. At 3% inflation, prices double every 70 ÷ 3 \approx 23 years. At 7%, every 10 years. It's a back-of-envelope check that comes from the natural log: $\ln(2) \approx 0.693$, so doubling time \approx 0.693 / \ln(1+r) \approx 70/r for small r.

Hyperinflation (typically defined as >50%/month) is rare in modern developed economies — the historical cases (Weimar Germany 1923, Zimbabwe 2008, Venezuela 2010s) involved fiscal collapse or war financing, not normal monetary policy. The 2021–2023 U.S. spike of 5–9% was uncomfortable but is two orders of magnitude below hyperinflation. Persistent high single-digit inflation is a more realistic planning concern than a Weimar scenario.

It depends on direction. If inflation is expected to fall, locking in long fixed rates means you pay above-market rates later. If inflation stays high or rises, fixed-rate debt becomes cheaper in real terms while fixed-rate lenders lose. Most borrowers benefit from fixed-rate mortgages in inflationary periods; most savers benefit from variable rates or inflation-linked instruments like TIPS and I Bonds.

A small positive target gives the Fed room to cut interest rates below the inflation rate (creating negative real rates) during recessions, which is its main stimulus tool. Targeting 0% would risk slipping into deflation, where consumers delay spending because prices fall, debts get harder to repay, and the economy can spiral downward. 2% is high enough to provide that buffer but low enough that long-term planning is still tractable.