Inflation Calculator

It compounds the price level: after t years at an annual inflation rate pi, prices have multiplied by (1 + pi)^t. The buying power of a fixed amount is the amount divided by that factor, and the sum needed to match today's buying power is the amount multiplied by it. At 2% over 20 years the factor is about 1.49, so 10,000 buys what about 6,730 buys today, and it takes about 14,859 to stand still. At a 0% rate nothing changes, and a negative rate (deflation) runs the same arithmetic in reverse.

For long horizons, the target of the central bank behind your currency is a reasonable base case; many aim at about 2% a year. Averages over past decades are typically somewhat higher, and single years can sit far above or below, so it is worth running the projection at two or three rates rather than betting on one: the target plus your country's recent average, for example. The calculator applies whatever you enter as a constant effective annual rate; check the published figures for your country rather than relying on any default.

The official rate tracks a consumer price index: a weighted basket built from what the average household buys, following an internationally standardized methodology. Your basket is not the average one. If rent, fuel, or groceries dominate your spending and those prices run hot, your personal inflation is higher than the headline number; frequent purchases also shape perception more than rare ones, so a jump in food prices feels larger than an equal fall in electronics. Both figures are real, they just answer different questions. For a personal projection it is entirely reasonable to enter a rate above the official one.

In nominal terms, at least the inflation rate after costs and taxes: a return exactly equal to inflation keeps buying power unchanged. The precise relation, known as the Fisher equation, is (1 + nominal) = (1 + real) x (1 + inflation), so a 5% return under 2% inflation yields a real return of about 2.9%, not 3%. Anything below inflation, including cash at zero interest, loses buying power even though the account balance never falls. That silent loss is exactly what this calculator makes visible.

Yes. Deflation, a sustained fall in the general price level, makes the same amount buy more over time, and the calculator accepts rates down to -2% to model it. Persistent deflation is rare in modern economies and is generally read as a symptom of economic trouble rather than a windfall, since it also depresses wages and encourages postponing spending. Short episodes of falling prices have occurred, though; the point of modeling one here is simply to watch the mechanics run in reverse.

It applies a single, constant inflation rate to the whole horizon; real inflation arrives unevenly, though the order of good and bad years does not matter here because no money flows in or out. It does not revalue historical amounts using official CPI series, does not add any interest or investment return to the amount, and ignores taxes and fees. It also uses one economy-wide rate: specific categories such as housing, education, or healthcare have historically drifted from the general index for long stretches. Treat the output as a scenario for the rate you chose, not a prediction.