How the CPI Inflation Calculator works
The Consumer Price Index (CPI) tracks the average price level of a fixed basket of goods and services over time. Because the index is just a number — not a dollar figure — comparing an index value from one date to an index value from another date tells you how much prices moved between those two points, and lets you convert any dollar amount from one period into the equivalent amount of purchasing power in the other period.
The formula
The calculator applies the standard CPI adjustment formula:
Adjusted Amount = Original Amount × (Ending CPI ÷ Starting CPI)
Divide the ending period's index value by the starting period's index value to get a ratio, then multiply your original dollar amount by that ratio. If the ratio is greater than 1, prices rose over the period and the adjusted amount is larger than the original; if it is less than 1, prices fell and the adjusted amount is smaller.
Worked example
Suppose the CPI index reads 218.056 in the starting period and 296.797 ten years later. The ratio is 296.797 ÷ 218.056 ≈ 1.3611. A starting amount of $1,000 is therefore equivalent to $1,000 × 1.3611 ≈ $1,361.10 in the ending period — prices rose about 36.11% in total over the ten years, which works out to an annualized rate of roughly 3.13% when compounded evenly year over year.
Total inflation versus the annualized rate
Total inflation is the full percentage change between the two CPI readings, regardless of how many years separate them. The annualized rate answers a different question: what single constant yearly rate, compounded over the number of years entered, would produce that same total change? Two periods with identical total inflation can have very different annualized rates if the number of years between them differs — inflation spread over 20 years compounds to a lower yearly rate than the same total spread over 5 years.
Getting real CPI index values
- The U.S. Bureau of Labor Statistics publishes the CPI-U (all urban consumers) index monthly and as annual averages at bls.gov/cpi. Look up the value for your starting month or year and your ending month or year.
- Use consistent series throughout — mixing CPI-U with CPI-W or a not-seasonally-adjusted series with a seasonally adjusted one will distort the comparison.
- The example index values preloaded in this calculator are illustrative only; substitute the actual published figures for your two dates before relying on the result.
Deflating instead of inflating
This same formula runs in either direction. To convert a present-day amount back into an earlier period's dollars, simply put the more recent CPI value in the starting field and the older CPI value in the ending field — the calculator does not care which period comes first chronologically, only which value goes in which field.