- What is Inflation?
- What Causes Inflation in the U.S.?
- How is Inflation Calculated?
- How Does Our Inflation Calculator Work?
- How Much is Inflation in the U.S.?
- What is Your Personal Rate of Inflation?
- What is the U.S. Consumer Price Index (CPI)?
- 6 Tips for Coping with Inflation
- How Can You Beat Inflation When Investing?
Inflation affects everyone, from rising grocery prices to higher rent and gas costs. Over time, the purchasing power of your money decreases, meaning you need more dollars to buy the same things.
But what is inflation? How does it impact your daily life? And most importantly, how can you prepare for it and minimize its effects on your finances? Find all the answers in our detailed guide below.
To help you understand the impact of inflation, we also built a free, online USD Inflation Calculator. It lets you calculate the value of money from any year from 1960 to today in just seconds.
What is Inflation?
Inflation is the gradual increase in the prices of goods and services over time, reducing the value of money. This means that as inflation rises, the same amount of money buys fewer goods.
For example, if a gallon of milk cost $5 last year but now costs $6, that’s a 20% increase due to inflation. Inflation affects everything from groceries and gas to housing and wages and plays a key role in the economy.
What Causes Inflation in the U.S.?
Inflation in the U.S. happens for several reasons:
- Demand-Pull Inflation – When demand for goods and services exceeds supply, businesses raise prices. If more people want to buy new cars but production is low, car prices go up.
- Cost-Push Inflation – When production costs rise, such as higher wages or raw materials, businesses pass the costs to consumers by increasing prices.
- Supply Chain Disruptions – Events like COVID-19, global conflicts, or natural disasters can cause shortages, making products more expensive.
- Government Policies & Monetary Policy – Low interest rates, stimulus checks, and increased government spending can inject more money into the economy, leading to inflation.
- Energy & Fuel Prices – Rising oil and gas prices increase transportation and production costs, affecting everything from groceries to airline tickets.
How is Inflation Calculated?
The inflation rate measures the percentage increase in the prices of goods and services over a certain period. It is calculated using the Consumer Price Index (CPI) which represents the average price change for a fixed basket of everyday items (like food, gas, clothes, etc) that consumers purchase.
Formula for Inflation Rate = ((CPI in Current Year − CPI in Previous Year) ÷ CPI in Previous Year)) × 100
How to calculate US inflation rate
For example, if the CPI was 260 last year and 275 this year:
((275 − 260) ÷ 260)) × 100 = 5.77%
This means the inflation rate is 5.77% for the year.
To save you time and effort, we’ve built an easy and instant U.S. inflation calculator at the top of this page, which helps you track inflation and see how it affects the value of the U.S. dollar. You can calculate inflation from as early as 1960 up to the present year.
How Does Our Inflation Calculator Work?
Our USD Inflation Calculator helps you see how inflation impacts the value of money over time.
How to use it:
- Enter the amount of money you want to compare.
- Select the starting year and ending year (e.g., 2000 to 2023).
- The calculator will show how much that amount is worth today, adjusting for inflation.
US Inflation Calculator
If $1,000 in 2000 is equivalent to $1,700 in 2023, inflation has reduced the purchasing power of money over time.
How Much is Inflation in the U.S.?
- Data is based on annual CPI inflation rates published by the U.S. Bureau of Labor Statistics (BLS).
- 2024 inflation rate is an estimate based on recent trends.
Below is a table showing the annual inflation rates in the U.S. in the last decade
| Year | Inflation Rate (%) |
|---|---|
| 2023 | 4.1% |
| 2022 | 8.0% |
| 2021 | 4.7% |
| 2020 | 1.2% |
| 2019 | 1.8% |
| 2018 | 2.4% |
| 2017 | 2.1% |
| 2016 | 1.3% |
| 2015 | 0.1% |
| 2014 | 1.6% |
Good to know
Inflation peaked at 9.1% in June 2022, the highest in over 40 years, before gradually decreasing.
What is Your Personal Rate of Inflation?
While the national inflation rate is useful, your personal inflation rate depends on what you spend money on.
US inflation calculator
If your grocery bill was $400 per month last year but is now $460, your personal grocery inflation rate is:
((460 − 400) ÷ 400) x 100 = 15%
This means your grocery costs have increased by 15%, even if the national inflation rate is lower.
By tracking your personal expenses, you can see how inflation affects your specific lifestyle
What is the U.S. Consumer Price Index (CPI)?
The Consumer Price Index (CPI) is a key measure used by the U.S. government to track inflation. It measures the average change in prices for a fixed basket of goods and services over time.
This basket includes:
- Housing (rent, home prices)
- Food & groceries
- Gas & transportation
- Healthcare & insurance
- Entertainment & clothing
How CPI Relates to Inflation:
- When CPI rises, it means prices are increasing, and inflation is happening.
- When CPI falls, prices are decreasing, indicating deflation.
Good to know
The CPI is updated monthly by the U.S. Bureau of Labor Statistics and is used to adjust everything from Social Security payments to tax brackets and minimum wages.
6 Tips for Coping with Inflation
Inflation can be tough, but these tips can help you manage rising costs:
- Cut Unnecessary Expenses – Review your subscriptions, dining out, and impulse purchases to save money.
- Buy in Bulk & Use Coupons – Stock up on non-perishable foods and household items to lock in lower prices.
- Negotiate Bills – Call internet, insurance, and phone providers to ask for better rates.
- Use Cashback & Rewards – Credit cards with cashback programs can help offset rising prices.
- Consider Generic Brands – Store brands often cost 20-30% less than name brands with similar quality.
- Increase Your Income – Look for side hustles, freelancing, or salary negotiations to keep up with rising costs.
How Can You Beat Inflation When Investing?
Investing is one of the best ways to protect your wealth from inflation over time. Here’s how:
- Stocks: Investing in stocks of strong companies helps grow your money faster than inflation. The S&P 500 has historically returned 8-10% per year, outpacing inflation.
- Real Estate: Owning property can protect against inflation since real estate values tend to rise along with inflation.
- Treasury Inflation-Protected Securities (TIPS): TIPS are U.S. government bonds that adjust for inflation, ensuring your money retains its value.
- Gold & Commodities: Gold and commodities like oil and agricultural goods often increase in value when inflation is high.
- High-Yield Savings & CDs: With rising interest rates, high-yield savings accounts and certificates of deposit (CDs) offer safer returns while protecting your money.
By diversifying your investments, you can stay ahead of inflation and maintain your financial security.
