US Inflation Calculator (CPI-U)

The CPI-U (Consumer Price Index for All Urban Consumers) is the most widely used measure of US inflation. It tracks the average change in prices paid by urban consumers for a representative basket of goods and services, including food, housing, apparel, transportation, medical care and education. The Bureau of Labor Statistics (BLS) publishes CPI-U data monthly at bls.gov/cpi. The index is expressed relative to the 1982-84 average, which is set to 100.

Inflation is the rate at which the general level of prices for goods and services rises over time, eroding the purchasing power of money. A dollar today buys less than a dollar did in 1990. Inflation matters for savings because money held in a low-interest account may lose real value if the account's interest rate is below the inflation rate. It matters for long-term financial planning because a retirement income that seems adequate today may buy substantially less 20 or 30 years from now.

The BLS collects approximately 80,000 price quotes each month from retail and service establishments across 75 urban areas. These prices are weighted by their share of consumer spending, based on the Consumer Expenditure Survey. The BLS publishes detailed methodology at bls.gov/cpi/questions-and-answers.htm. The CPI-U covers approximately 93% of the US population, making it the broadest of the several CPI measures.

Inflation reduces the real (purchasing-power-adjusted) value of investment returns. If your portfolio returns 5% nominally but inflation is 3%, your real return is approximately 1.94% (using the Fisher equation). Over long periods, even modest inflation compounding means an investment that appears to have grown substantially may have gained very little in real terms. The SEC and CFPB both recommend factoring inflation into long-term financial plans.

A nominal return is the raw percentage gain before adjusting for inflation. A real return adjusts for inflation to show how much purchasing power actually increased. For example, if you earned 7% nominally in a year when inflation was 4%, your real return was approximately 2.88%: (1.07 / 1.04) - 1. The Federal Reserve's target inflation rate of 2% means that even in low-inflation environments, a meaningful share of nominal investment gains is absorbed by rising prices.

Based on BLS CPI-U data, the highest annual inflation years in the data series available here include 2022 (when CPI-U rose from 280.1 to 292.7, approximately 8.0% for the year), 2021 (approximately 4.7%), and 1980 (approximately 13.5% based on the index rise from 72.6 to 82.4). The 1970s were broadly a high-inflation decade. More recently, inflation accelerated sharply in 2021 and 2022 following pandemic-era supply disruptions and stimulus spending.