Money Empire

Inflation Calculator: See How Much Inflation Is Costing You


Last year, nearly every sector of the economy was affected by rising prices as the United States faced high inflation.
The overall increase in prices - measured by the consumer price index - was 9.1% for the 12 months ending June 2022. Although inflation is lower now - the CPI increased by 3% over the 12 months through June 2023 - the impact on consumers varies based on their individual expenses.
You can use this inflation calculator to see how prices are changing (2023 data is through April 30):
What is inflation?
Inflation is the gradual loss of purchasing power over time as prices rise. It is usually expressed as a percentage and typically refers to a prolonged trend of increasing prices across various sectors, affecting common household expenses such as food and energy.
Those who rent and spend a significant portion of their income on basic necessities are often the first to feel the impact of inflation on their budgets. Rising costs associated with inflation can be immediately observable, whether at the gas pump or the grocery store, or they can take the form of "shadow inflation," in which the quantity or quality of goods decreases even though prices remain relatively stable.
In addition to low-income individuals, those who do not own stocks are particularly at risk.
"In a moderately inflationary environment, it's even more important to get your money working for you in the stock market," says Alice Finn, founder of PowerHouse Assets and author of "Smart Women Love Money."
Historical Inflation Rates

Economists often rely on the CPI, which measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, to track historic rates of inflation.

Since the CPI's creation, the annual percentage change in the index was a historic high of 17.8% in 1917. More recently, during a period of particularly high inflation in the 1970s and 1980s, inflation hit its annual high of 13.5% in 1980.

When evaluating inflation rates, keep in mind CPI measurements of inflation tend to slightly lag immediate economic conditions.

"The CPI index is designed to try to capture the cost of living for households. It’s never going to be a perfect measure," says Andrew Hunter, deputy chief economist at Capital Economics. "Housing is a very big part of the CPI index, a big driver of the inflation figures. It tends to, as far as the official BLS measure, be very slow moving."

"After rising very sharply over the past couple of years, housing inflation is now slowing according to the CPI, but this is definitely an area where that won’t necessarily reflect what households are actually experiencing,” Hunter says.
Inflation Today

The annual rate of inflation as of June, according to the CPI, is 3% over last year. According to the PCE, the rate of inflation is 3.8% over the last year as of May 2023.

“Broadly measured, inflation is down considerably compared to what we were seeing last year,” says Andy Baxley, senior financial planner at The Planning Center in Chicago.

"We’re finally seeing positive real returns on certain high-yield savings and money market accounts, which is a welcome change. With the worst of inflation hopefully in the rearview (for now), we can all breathe a sigh of relief. That said, we shouldn’t expect prices on goods and services to return to pre-COVID levels. We are seeing price declines in certain categories compared to last year, but in general, we should expect a cooling off of the rate of inflation, not widespread deflation. Consumers waiting for prices to come down before making a big purchase may be disappointed,” he adds.

The average price of gas decreased by 26.5% over the last 12 months ending June 2023, according to the CPI, after rising 43.6% for the 12 months ending April 2022.

"We’ve just lived through several years of elevated inflation,” Zimmerman says.

Zimmerman also says that early on in the cycle, labor shortages led to supply shocks, which drove up the price of household appliances, lumber and automobiles. As the economy emerged from lockdown, people began to increase personal consumption, once again going out to restaurants, taking vacations and hosting large social events like weddings that had been delayed by the pandemic.

This increase in demand drove up the prices of flights, hotel rooms and consumer discretionary goods, Zimmerman says. And this shift in the underlying cause of inflation led the Federal Reserve to embark upon an aggressive monetary policy designed to help cool demand.

"We’re now starting to see the impact of the Fed’s actions, but we expect prices will remain high because so much new money was printed during the pandemic that it has diluted the value of our existing dollars, leading to permanently higher nominal prices,” he says.