Inflation is a measure of how prices change over time. The U.S. Bureau of Labor Statistics (BLS) has defined a "basket of goods," which is a collection of many goods and services that are commonly used by consumers. Every month, the prices of these goods are measured and compared to previous prices.
Use the inflation calculator form as a starting point for answering questions that you have about the historical inflation rate in the U.S. This calculator allows you to "correct for inflation". You can also learn about inflation for the UK, Canada, Australia, and Europe.
Compared to last year's annual rate, the inflation rate in 2018 is now 2.95%1. If this number holds, $100 today would be equivalent to $102.95 next year.
|Cumulative price change||46.34%|
|Average inflation rate||2.95%|
|Price difference ($100 base)||$46.34|
|CPI in 2000||172.2|
|CPI in 2018||252.006|
The result of the Bureau of Labor Statistics' monthly "basket of goods" measurement is a single number known as the Consumer Price Index (CPI). This the weighted average of many changes in the price of goods and services.
Inflation is quantified as a rate because it is a measure of how the CPI changes over time. When you see an inflation rate, the number is based on change in CPI between two points in time.
It's important to know which dates are being compared in order to understand the inflation rate. In most cases, inflation rates are 12-month trailing. This means, for example, that the inflation rate released in March 2018 is based on a comparison to the CPI in March 2017. If the inflation rate is annual, then it's based on the year-over-year CPI.
The concept of "purchasing power" is used to compare the value of a dollar between different years. The Consumer Price Index directly measures purchasing power by keeping track of how many dollars it takes to buy common goods and services.
For example, if an apple costs $0.50 last year and $1.00 today, we can say that "the purchasing power of an apple has decreased," because a dollar now buys you 1 apple instead of 2 (you can view actual inflation rates for apples and many other items).
Inflation is linked to purchasing power. As inflation takes place, the purchasing power of the dollar decreases. If deflation takes place, the purchasing power of the dollar increases.
This inflation calculator uses the following inflation rate formula:
Then plug in historical CPI values. The U.S. CPI was 172.2 in the year 2000 and 251.989 in 2018:
$100 in 2000 has the same "purchasing power" or "buying power" as $146.34 in 2018.
To get the total inflation rate for the 18 years between 2000 and 2018, we use the following formula:
Plugging in the values to this equation, we get:
Raw data for these calculations comes from the Bureau of Labor Statistics' Consumer Price Index (CPI), established in 1913. Inflation data from 1665 to 1912 is sourced from a historical study conducted by political science professor Robert Sahr at Oregon State University.
You may use the following MLA citation for this page: “Inflation Calculator.” U.S. Official Inflation Data, Alioth Finance, 20 Aug. 2018, https://www.officialdata.org/.