Understanding Inflation

Inflation means the same amount of money buys less over time. Understanding it helps you compare prices across years and plan for the future.

What is Inflation?

Inflation is the general rise in prices over time. When inflation is 3%, a dollar today buys about 3% less than a dollar a year ago. Central banks aim for modest inflation (often around 2%) to encourage spending and investment.

The Consumer Price Index (CPI)

The CPI measures the average change in prices for a basket of goods and services (food, housing, transport, etc.). In the US, the Bureau of Labor Statistics publishes CPI data. It's the most common way to adjust for inflation.

📊 Use our US Inflation Calculator to see how much a past amount would be worth today.

Why It Matters

Wage comparisons — "$50,000 in 1990" vs today
Investment returns — Nominal vs real (inflation-adjusted) returns
Savings — Money in a low-interest account loses purchasing power over time

Inflation and Precious Metals

Gold and silver are often viewed as inflation hedges because their prices may rise when the purchasing power of paper money falls. See our Gold & Silver as Commodities guide for more.

Limitations

CPI is an average — your personal inflation rate may differ based on what you buy. Our calculator uses US CPI only; other countries have their own indices.

For informational purposes only. Not financial advice.