Inflation Calculator

Inflation measures the rate at which prices for goods and services rise, eroding purchasing power over time. The Consumer Price Index (CPI), published monthly by the Bureau of Labor Statistics, is the most widely used measure in the United States. When CPI rises 3%, it means the same basket of goods costs 3% more than a year ago.

Even moderate inflation of 3% per year means prices roughly double every 24 years. A gallon of milk that costs $4 today would cost $8 in 2050. This is why understanding inflation is critical for retirement planning, salary negotiations, and long-term investment decisions.

As of early 2026, core PCE inflation (the Fed's preferred measure) sits at approximately 2.4% — above the Federal Reserve's 2% target but well below the 8%+ peaks of 2022. Headline CPI is slightly higher due to energy price volatility from the Iran war and tariff-driven import price increases.

The Fed has held interest rates at 3.50-3.75% partly to combat this sticky inflation. Tariffs under Section 122 (10-15% on imports) are adding an estimated 0.5-1% to consumer prices, creating a policy-driven inflation floor that monetary policy alone can't address. Historical US inflation has averaged about 3.3% annually since 1970.

Money in a savings account earning 0.5% while inflation runs at 3% is losing 2.5% of its purchasing power every year. After 10 years, $10,000 in that account buys only $7,800 worth of goods in today's dollars. This is why financial advisors insist that long-term savings must be invested in assets that outpace inflation — stocks (10% historical average), real estate (3-5%), or inflation-protected bonds (TIPS).

High-yield savings accounts paying 4.5%+ currently beat inflation, making them a good short-term option. But this won't last — as the Fed cuts rates, savings yields will fall. For money you won't need for 5+ years, the stock market remains the most reliable inflation hedge over long time horizons.