Inflation Purchasing Power Calculator

Optional. The yearly rate the money earns while it waits, read as an annual percentage yield, the effective rate a bank quotes. Leave it blank and the money is treated as held in cash earning nothing, which is the plain purchasing-power question and the same as entering 0; enter a rate and the future figures say whether the account keeps up with the inflation you assumed. Interest is taken as untaxed.

The calendar year whose prices the amount belongs to, any whole year the index covers from 1913 to the latest one. It may come after the year to restate it in, and then the calculation runs backwards, saying what a later amount was worth in an earlier year's prices. The latest year is only partly published, so choosing it raises a warning.

How many years into the future to project the amount. The future figures compound the assumed inflation rate, and any savings rate, once a year for this many years. It is also the down axis of the grid at the foot, which is why it is required rather than optional.

The sum of money to restate, in the dollars of the year it is from: a price, a salary or a balance. Every figure in the past half scales with it, because it is multiplied by a ratio of two index values. A negative amount is refused, and nothing gives nothing throughout.

The calendar year whose prices the amount is restated in. The last complete annual average is the usual choice; the latest year is the mean of the months published so far and changes with each release, which the status line says. Choosing the start year again shows no change at all.

The inflation rate you assume for every year ahead, as a percentage a year. It is an assumption, not a forecast: the published ten-year expectations of professional forecasters, the bond market and a Federal Reserve Bank model are shown on the last chart for comparison, and a rate above the highest rolling average the index has recorded is flagged as a stress case. It is also the across axis of the grid at the foot.

Machinery. Excel requires the quantity being tabulated to sit in the grid's top-left corner, where it means nothing to a reader, so it is formatted away. It holds the share of today's buying power kept.

The values down the left of the grid: the years ahead, in steps of two either side of yours and never below none. Read a row to hold the horizon fixed and vary the inflation rate. The middle entry is your own figure.

Machinery, and NOT an input. The same for the across axis: Excel substitutes into it while filling the grid, and the rest of the time it mirrors the assumed inflation rate.

The return a year after inflation, by the exact Fisher relation: one plus the savings rate divided by one plus the inflation rate, less one, which equals the difference of the two rates divided by one plus the inflation rate. So whenever inflation is above zero it lies closer to zero than the plain difference: subtracting the rates overstates a gain, and overstates a loss as well.

The values across the top of the grid: the assumed inflation rate, in half-point steps either side of yours and never below nothing. Read a column to hold the rate fixed and vary the horizon. The middle entry is your own rate.

Machinery, and NOT an input. Excel substitutes each value from the down axis into this while it fills the grid; the rest of the time it mirrors the years ahead. Change the years ahead above, never this: the axis is derived from it, so editing the mirror moves the axis while the grid is filled and the grid comes out meaningless.

The end year less the start year. It is negative when the end year comes first, which is how a later amount is taken back to an earlier year's prices; the rate over the period is the same either way.

How many years at these rates until the money buys half of what it buys today, worked out from the real return. It is blank when the real return is zero or above, because then the money never loses half its buying power.

The amount multiplied by the end-year index over the start-year index: what it takes in the end year to buy what the amount bought in the start year. It compares yearly averages; a comparison of two single months gives a somewhat different figure.

The body of the grid: the share of today's buying power kept, worked out again for every pair of years ahead and inflation rate on the two axes. One hundred and twenty-one entries, each one the whole projection run again. It is a component of the grid rather than a result on its own.

The amount restated at the index of the latest month published, rather than at a yearly average, which is what most people mean by today's dollars. It moves with every monthly release, and a single month carries seasonal ups and downs that a yearly average smooths out.

Reads OK, or explains why the inputs are not valid or why the answer deserves a second look: a year the index does not cover, the same year twice, a latest year that is not yet complete, or an assumed rate above the highest rolling average the index has recorded.

The share of today's buying power the money still has after the years ahead: one plus the savings rate over one plus the inflation rate, raised to the number of years. Above 100 percent means the savings rate beat inflation. This is what the grid at the foot tabulates.

The share of today's buying power lost over the years ahead, one less the share kept. Negative means the money gained buying power.

How much less, or more, a dollar buys in the end year than it did in the start year. It is not the rise in prices with its sign changed: prices doubling halves what a dollar buys, a change of 50 percent, not 100.

The rate that, compounded once a year over the years between, turns the start-year index into the end-year index. This is the rate to use for how fast prices rose on average. It is blank when the two years are the same.

The simple average of each year's inflation rate over the same years. It is shown because it is the figure people quote, and it is never below the compound rate: averaging rates ignores compounding and so overstates the average pace of prices. It is blank when the two years are the same.

The same index for the end year. Dividing it by the start-year figure gives how far prices moved between the two years, and every figure in the past half comes from that one ratio.

What the goods the amount buys today will cost after the years ahead, if prices rise at the assumed rate every year. It is the assumption compounded, not a forecast.

What that future balance will buy, stated in today's dollars: the balance deflated by the assumed inflation. Below the amount means the money lost ground to prices; above it means it gained.

What the amount grows to at the savings rate over the years ahead, before any tax on the interest. With the savings rate left blank the money is held as cash, so this is the amount itself.

The consumer price index for the start year: the average of that year's monthly readings for all urban consumers, on a scale where the average of 1982 to 1984 is 100. On its own it means little; what matters is its ratio to the end-year figure.

How far the price level rose from the start year to the end year, as a share of where it started. A backward period shows a fall, because the prices are being taken back in time.