How the Inflation Calculator works (with formulas)

Inflation math looks intimidating until you see it’s the same compounding idea as interest. Instead of money earning interest, prices “compound upward” at an inflation rate. This page supports three related calculations: (1) inflating a past amount to a future cost, (2) deflating a future amount to today’s buying power, and (3) finding the implied annual inflation rate between two prices (often called CAGR).

Suppose something costs PV today (or in the past), inflation is r per year, and n years pass. The estimated future cost FV is:

• FV = PV × (1 + r)ⁿ

Here, r is the inflation rate expressed as a decimal. So 3% inflation becomes r = 0.03. The term (1 + r)ⁿ is the compounding multiplier. If you inflate $100 for 10 years at 3%, you multiply by (1.03)¹⁰. That’s why inflation can feel small annually but large over long periods.

The reverse question is just the inverse operation. If you have an amount in the future (or a newer price) and want to know what it’s worth in “today dollars,” divide by the same multiplier:

• Real Value (today) = Future Amount ÷ (1 + r)ⁿ

This is often called discounting for inflation. It’s useful when you want to compare salaries across years, evaluate a long-term contract, or measure how much purchasing power you gained (or lost).

Sometimes you don’t know the inflation rate. You only know the price changed from A to B over n years. The implied annual inflation rate is the compounding rate that makes A grow into B:

• r = (B / A)^1/n − 1

This is exactly the same as CAGR (Compound Annual Growth Rate). In inflation terms, it answers: “If the price had increased by the same percentage every year, what would that annual percentage have been?” Real CPI inflation is not constant, but CAGR is a clean summary for comparisons and storytelling.

People also like the “total inflation over the period,” which is the percent change from start to finish:

• Cumulative inflation % = ( (1 + r)ⁿ − 1 ) × 100%

If r = 0.03 and n = 10, cumulative inflation is about 34.39%. That’s why 3% “doesn’t sound like much,” but over a decade it’s a big shift in what money can buy.

Examples you can copy (viral-friendly)

You paid $1,200 per month. Assume 4% inflation for 8 years. Future cost: FV = 1200 × (1.04)⁸ ≈ $1,642. That’s ~36.8% cumulative inflation. Screenshot it and caption: “Same rent, different universe.”

Deflating for inflation: real value today = 10,000 ÷ (1.03)¹⁵ ≈ $6,412. Translation: $10k in 15 years buys roughly what $6.4k buys today (at 3% inflation).

Inflation rate (CAGR) r = (9/5)^1/7 − 1 ≈ 8.7%/yr. That’s “spicy.” This is how you turn a random price change into a clear annual rate for comparison.

Even 2% inflation for 30 years doubles prices: (1.02)³⁰ ≈ 1.81 (an 81% increase). At 3%, (1.03)³⁰ ≈ 2.43 (a 143% increase). This is why long timelines matter.

What the calculator shows (and how to interpret it)

After you calculate, the result panel shows four useful numbers. Depending on your selected mode, some of these are “main” and others are “supporting” metrics.

This is the inflation-adjusted price after compounding. If you’re inflating a past amount, this is your headline answer: “What would it cost after n years at r% inflation?”

This is the “real value” in today’s dollars. If you’re deflating a future amount, this is your headline. If you’re inflating a past amount, buying power is a nice reverse-check: “If the future price is FV, what is FV worth today?”

This is the total percent increase over the entire period. It’s the most shareable stat because it compresses a long timeline into one number. When cumulative inflation is high, people feel “sticker shock” — and that’s exactly the content that gets reposted.

In rate mode, this is your core output: the annual percent that connects Amount A to Amount B over n years. In the other modes, it simply repeats the rate you entered (so your screenshot includes the assumption).

The “sticker-shock meter” is a playful indicator based on cumulative inflation. It’s not a scientific scale— it’s designed for fast scanning and shareability.

Frequently Asked Questions

• Is this the same as a CPI Inflation Calculator?

  Not exactly. CPI calculators use historical CPI tables to adjust real prices between specific calendar years. This tool uses a rate you enter (or a rate derived from two prices) and compounds annually. It’s perfect for “what-if” planning and education, and it’s often accurate enough for quick comparisons—but it’s not a replacement for official CPI data.

• What inflation rate should I use?

  If you’re doing personal planning, many people explore 2–3% for “stable” scenarios and 4–8% for more stressful scenarios. If you’re comparing real history, use CPI data (or compute an implied CAGR from two known prices). The “right” rate depends on the country, time period, and category (housing inflation can differ from food inflation).

• Does inflation compound monthly or annually?

  Real inflation happens continuously and changes month to month, but annual compounding is a standard approximation. For most long-term comparisons, annual compounding is clean and intuitive. If you need monthly precision, use CPI series or a monthly compounding model. For a viral “then vs now” comparison, annual compounding is more than enough.

• Why does inflation feel bigger over time?

  Because compounding multiplies. Each year’s inflation raises the base for the next year. A steady 3% for 20 years is not 60%; it’s about 81% because each year builds on the last. The longer the time horizon, the more compounding dominates.

• Can I use this for salary comparisons?

  Yes. If you earned $60,000 ten years ago and inflation averaged 3%, you can estimate what salary would be needed today to have similar purchasing power: 60,000 × (1.03)¹⁰ ≈ $80,600. That doesn’t mean you should earn exactly that amount (markets and roles change), but it gives a useful baseline.

• What is “real value”?

  Real value means “inflation-adjusted.” It answers: “How much stuff can this money buy?” Nominal values are the raw dollars. Real values account for rising prices. When people say “in today’s dollars,” they’re talking about real value.

• Does deflation ever happen?

  Yes, though it’s less common. If your inflation rate is negative, the formulas still work (prices decrease over time). Deflation can occur in specific sectors (like electronics) or during economic downturns.