Inflation Calculator
Measure how inflation reduces the real value of your savings and calculate the purchasing power of future dollars.
Results
The Inflation Calculator quantifies the purchasing power loss of cash holdings over time. The output shows the nominal value of your savings, the inflation-adjusted (real) value, and the percentage of purchasing power lost.
Understanding Inflation
Inflation is the sustained increase in the general price level of goods and services. When prices rise, each dollar purchases less than before. The Consumer Price Index (CPI) tracks this change by measuring the cost of a standardized basket of consumer goods.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) is the primary measure of inflation in the United States, published monthly by the Bureau of Labor Statistics (BLS). The CPI tracks the average price change of approximately 80,000 items across 8 major categories: food, housing, apparel, transportation, medical care, recreation, education, and other goods. A CPI increase from 300 to 309 represents a 3.0% annual inflation rate.
Purchasing Power Erosion
Purchasing power erosion occurs when inflation reduces the quantity of goods and services a fixed amount of money can buy. A $100 grocery basket in 2024 costs approximately $103 in 2025 at 3.0% inflation. Over 10 years, the same $100 can only purchase goods worth approximately $74.41 in today's terms — a 25.6% loss of purchasing power.
Inflation and CD Yield
CDs protect against inflation when the APY exceeds the annual inflation rate. A CD earning 5.00% APY during 3.0% inflation produces a real return of approximately 1.94% (using the Fisher equation: real rate ≈ (1.05/1.03) − 1). When CD rates fall below the inflation rate, the depositor's purchasing power declines despite earning nominal interest.
Price Projector
See how inflation increases the cost of everyday goods over time. Enter a current price and inflation rate to project the future cost at 5, 10, and 20-year horizons.
Future Cost Projector
Types of Inflation
There are 3 primary types of inflation based on origin:
Demand-Pull
Occurs when aggregate demand exceeds aggregate supply. Consumer spending, government spending, and monetary expansion drive demand-pull inflation.
Cost-Push
Occurs when production costs (raw materials, wages, energy) increase, forcing producers to raise prices. Supply chain disruptions and commodity shortages trigger cost-push inflation.
Built-In
Occurs when workers demand higher wages to keep pace with rising prices, creating a wage-price spiral. Built-in inflation perpetuates itself through expectation-driven behavior.
Inflation-Protected Securities
Treasury Inflation-Protected Securities (TIPS) adjust the bond's principal value in proportion to changes in the CPI. TIPS provide a guaranteed real rate of return regardless of inflation. Series I Savings Bonds (I Bonds) combine a fixed rate with an inflation adjustment rate, providing a composite yield that tracks CPI changes.
Calculate Inflation Impact
Enter your savings amount above to see how inflation affects the real value of your holdings over time.
Calculate ImpactFAQs
What is inflation?
Inflation is the sustained increase in the general price level of goods and services over time, measured as an annual percentage. Inflation reduces the purchasing power of each dollar.
How is inflation measured?
Inflation is measured by the Consumer Price Index (CPI), which tracks the average price change of a basket of consumer goods and services. The Bureau of Labor Statistics publishes the CPI monthly.
How does inflation affect CD returns?
Inflation erodes the real purchasing power of CD returns. A CD earning 5.00% APY during 3% inflation produces a real return of approximately 2%.
What is the historical average inflation rate in the US?
The historical average inflation rate in the United States is approximately 3.0% per year, based on CPI data from 1926 to present.
Can CDs protect against inflation?
CDs protect against inflation only when the CD APY exceeds the annual inflation rate. During high inflation periods, standard CD rates may not fully offset purchasing power erosion.