The basic formula
Inflation is the percentage change in the price level over time. The formula is: (new price − old price) ÷ old price × 100. If a basket of groceries cost $100 last year and $103 today, inflation for that basket is 3%. Our percentage change calculator does this in one step.
Using the Consumer Price Index
Governments measure inflation with a price index such as the US Consumer Price Index (CPI). To compare two dates, divide the later index value by the earlier one and subtract 1. Official monthly CPI figures are published by the Bureau of Labor Statistics, and most countries have an equivalent statistics office.
Purchasing power
Inflation reduces what each dollar can buy. At 3% inflation, $1,000 today will buy what roughly $744 buys today in ten years. The formula is amount ÷ (1 + rate)^years. Even moderate inflation compounds quickly, which is why cash under the mattress loses value.
Did your raise beat inflation?
Calculate your raise as a percentage change, then subtract the inflation rate to get your "real" raise. A 4% raise with 3% inflation is about a 1% real gain. A 2% raise during 3% inflation is a real pay cut. This simple comparison is one of the most useful pieces of money math you can do each year.
Protecting savings
Savings that earn less than inflation lose real value. Compare your savings account rate with current inflation. Options often considered include high-yield savings accounts, inflation-protected government bonds and diversified long-term investments. Our compound interest calculator shows how a rate above inflation grows your money over time.
Personal inflation
Your personal inflation rate can differ from the official number. Someone who drives a lot is more affected by fuel prices, while renters feel housing costs more. Track your own main expenses for a few months to understand which prices hit your budget hardest.
Frequently asked questions
What is the formula for inflation?
(New price − old price) ÷ old price × 100.
How much is $1,000 worth after 10 years of 3% inflation?
About $744 in today's purchasing power.
How do I know if my raise beat inflation?
Subtract the inflation rate from your raise percentage; a positive result is a real increase.
Where are official inflation numbers published?
In the US, by the Bureau of Labor Statistics in the monthly CPI report.