Inflation Calculator
See how inflation erodes purchasing power over time, compare multiple inflation scenarios side by side, or find the salary you'd need to keep pace with rising prices. Free, instant, any currency.
What Is Inflation?
Inflation is the rate at which the general price level of goods and services rises over time, meaning each unit of currency buys progressively less. A 3% annual inflation rate means something costing 100 today will cost roughly 103 next year — and compounds meaningfully over longer periods.
Central banks like the US Federal Reserve, Bank of England and Reserve Bank of Australia typically target around 2% annual inflation as healthy for economic growth — enough to encourage spending without eroding savings too aggressively.
Why Comparing Multiple Rates Matters
No one can predict future inflation with certainty, which is exactly why this calculator's Compare Rates mode shows three realistic scenarios side by side rather than forcing you to pick one number. Planning around a single assumed rate can be misleading — comparing the Fed's 2% target, a longer-term historical average around 2.75%, and an elevated scenario around 5% gives a much more honest picture of the range of outcomes you might realistically face.
How Does Inflation Affect Savings?
If your savings account pays 2% interest but inflation runs at 3%, your money is actually losing purchasing power at roughly 1% per year — known as a negative real return. To genuinely grow your wealth, your investments need to outpace inflation, not just generate a positive nominal return.
Historical Inflation Rates by Region
| Region | Long-Term Average |
|---|---|
| United States | ~3% per year over the last century |
| United Kingdom | ~3-4% per year long term |
| Australia | ~3% per year long term |
| Eurozone | ~2% per year since the Euro's introduction |
These are broad historical averages, not predictions — actual inflation varies significantly year to year and by country. For long-term planning, 3% is a reasonable default assumption for most developed economies; for short-term planning, check your central bank's current published rate.
Planning for Inflation in Retirement and Salary Negotiations
- Retirement planning. Inflation is one of the biggest long-term risks to retirement savings — money saved today will buy meaningfully less in 20-30 years. Our Retirement Calculator accounts for inflation when projecting future values.
- Salary negotiations. Use Salary Needed mode to find exactly what raise keeps your real income flat against inflation — useful groundwork before any pay review conversation.
- Investment planning. Compare your expected investment returns against inflation using our Investment Calculator to understand your genuine real growth, not just nominal figures.
FAQs
What is a good inflation rate?
Most central banks target around 2% annual inflation as healthy for economic growth. Above 5% is considered high, above 10% severe. This calculator’s Compare Rates mode lets you see outcomes across a realistic range rather than guessing one number.
What inflation rate should I use?
For long-term planning, 3% is a reasonable historical average for most developed economies. For short-term planning, check your central bank’s current published rate. When uncertain, use Compare Rates mode to see a range of outcomes.
How does inflation affect my savings?
If your savings earn less interest than the inflation rate, your money loses real purchasing power even as the balance grows. Always compare your savings rate against current inflation to understand your real return.
How is the "Salary Needed" figure calculated?
It projects your current salary forward using the same compounding formula as future value, showing exactly what salary would be needed to maintain today’s purchasing power after a chosen number of years at your assumed inflation rate.
How does inflation affect retirement planning?
Inflation is one of the biggest long-term risks in retirement planning — money saved today buys meaningfully less in 20-30 years. Our Retirement Calculator factors inflation into future value projections.
What's the difference between inflation and interest rates?
Inflation measures how fast prices rise. Interest rates are set by central banks partly to control inflation — higher rates typically slow inflation by making borrowing more expensive and reducing spending.
Is this calculator free?
Yes completely free with no sign-up needed.