Calculate how inflation affects purchasing power over time. See the true value of your money and plan more effectively for future expenses.
Inflation represents the rate at which the value of a currency is falling and consequently the general level of prices for goods and services is rising. It's an economic phenomenon with significant implications for individuals, businesses, and the overall economy.
Inflation can be triggered by various factors:
Occurs when aggregate demand exceeds available supply. When too many consumers are trying to buy too few goods, prices increase. This commonly happens in rapidly growing economies.
Happens when production costs increase, forcing businesses to raise prices to maintain profit margins. Rising costs of raw materials, labor, or increased taxes can trigger this type of inflation.
Results from an excessive growth in the money supply. When more money chases the same amount of goods, prices tend to increase, reducing the currency's purchasing power.
Occurs when people expect future inflation and demand higher wages. This creates a wage-price spiral as businesses pass these costs to consumers through price increases.
Several indexes are used to measure inflation rates:
Inflation rates have varied significantly throughout history and across different countries:
| Period | US Average Inflation Rate | Notable Events |
|---|---|---|
| 1913-1920 | 9.8% | World War I and its aftermath |
| 1920s | -0.5% | Post-war deflation |
| 1930s | -2.0% | Great Depression |
| 1940s | 5.5% | World War II |
| 1950s | 2.2% | Post-war economic boom |
| 1960s | 2.5% | Relatively stable economic growth |
| 1970s | 7.4% | Oil crises, end of Bretton Woods system |
| 1980s | 5.1% | Volcker's anti-inflation policies |
| 1990s | 2.9% | Tech boom, economic expansion |
| 2000s | 2.5% | Dot-com bubble, housing crisis |
| 2010s | 1.8% | Post-financial crisis recovery |
To protect yourself against the effects of inflation:
Our Inflation Calculator helps you visualize the real impact of inflation on your money's value over time. By understanding how inflation affects purchasing power, you can make more informed financial decisions and develop strategies to protect your wealth against its eroding effects.
For a quick estimate of how long it takes for prices to double, divide 72 by the annual inflation rate:
The decrease in the general price level of goods and services, opposite of inflation. Can lead to decreased economic activity as consumers delay purchases.
Extremely rapid inflation, typically measuring more than 50% per month. Historical examples include Germany in the 1920s and Zimbabwe in the 2000s.
A combination of stagnant economic growth, high unemployment, and high inflation. Particularly challenging for policymakers as solutions for one problem may worsen another.
Inflation measure excluding volatile items like food and energy prices. Often used by central banks to determine underlying inflation trends.