Inflation Calculator

Multiply by (1 + rate) for each year. £1,000 at 3% for ten years becomes £1,343.92, because inflation compounds on the already-inflated price rather than on the original one.

Because each year's rise applies to the previous year's price. Ten years at 3% is 1.03 to the tenth power, which is 34.4% — the extra 4.4 points is the compounding.

No. If prices rise 34%, your money buys 1 ÷ 1.344 of what it did, which is a 25.6% loss of purchasing power. The two figures are reciprocals rather than opposites, and confusing them overstates the damage.

Take the ratio and the root of the number of years: a doubling over ten years is 2^(1/10) − 1, which is 7.18% a year. Dividing 100% by ten to get 10% is wrong and always too high.

The headline consumer price index for your country over the period in question. Your personal rate will differ — housing and energy weight differently for every household — so treat the index as a benchmark rather than as your experience.

It erodes the real value of fixed-rate debt, which is why a long fixed-rate mortgage becomes easier to service over time in an inflationary period. Variable-rate debt usually does the opposite, because rates rise to fight the inflation.

A shortcut for doubling time: divide 72 by the annual rate. At 3% inflation prices double in about 24 years, and at 6% in about 12. It is accurate to within a few percent for rates between 1 and 15.

Because the index weights a national average basket. Households spending more on housing, energy or childcare — all of which have risen faster than the average in many countries — genuinely experience a higher rate.

The index excluding food and energy, which are volatile and driven by global commodity prices. Central banks watch it because it reflects underlying price pressure rather than a temporary oil move.

It hurts cash savers whenever the interest rate is below inflation, which is common. The real return is what matters — a 4% account during 6% inflation loses about 1.9% of purchasing power a year.

Falling prices, which sounds good and discourages spending and investment because waiting is rewarded. It also raises the real value of debt, which is why central banks treat it as more dangerous than mild inflation.

Multiply by the ratio of the price index now to the index then. Statistical agencies publish the series, and most have a tool that does it directly for their own currency.