1. What is the Inflation Rate?

The inflation rate measures the percentage change in price levels between two periods, typically calculated using the Consumer Price Index (CPI). It indicates how much prices have risen over a specific time frame.

2. How Does the Calculator Work?

The calculator uses the inflation rate formula:

Where:

• \( CPI_{\text{month1}} \) — Consumer Price Index for the base period
• \( CPI_{\text{month2}} \) — Consumer Price Index for the current period

Explanation: The formula compares the change in price levels relative to the base period, expressed as a percentage.

3. Importance of Inflation Calculation

Details: Tracking inflation helps economists, policymakers, and businesses understand price stability, make monetary policy decisions, and adjust wages and contracts.

4. Using the Calculator

Tips: Enter both CPI values (must be positive numbers). Month 1 is typically the earlier/base period, while Month 2 is the current/later period.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a normal inflation rate?
A: Most central banks target 2-3% annual inflation. Rates above 10% are considered high inflation, while negative rates indicate deflation.

Q2: How often is CPI calculated?
A: In most countries, CPI is calculated monthly by statistical agencies.

Q3: What's the difference between monthly and annual inflation?
A: Monthly inflation shows price changes between two months, while annual inflation compares prices to the same month in the previous year.

Q4: Why use CPI for inflation calculation?
A: CPI represents a basket of consumer goods and services, making it a reliable indicator of price changes affecting consumers.

Q5: Can this calculator be used for annual inflation?
A: Yes, by comparing CPI values from the same month in different years (e.g., January 2023 vs January 2024).