1. What is the Inflation Calculator?

The Bank of England Historic Inflation Calculator shows how the purchasing power of money has changed over time due to inflation. It uses Consumer Price Index (CPI) data to calculate equivalent values between different years.

2. How Does the Calculator Work?

The calculator uses the inflation formula:

Where:

• \( \text{Value then} \) — Original amount of money
• \( \text{Value now} \) — Equivalent amount in today's money
• \( \text{CPI then} \) — Consumer Price Index in the original year
• \( \text{CPI now} \) — Consumer Price Index in the comparison year

Explanation: The formula adjusts the original amount by the ratio of price levels between the two years.

3. Importance of Inflation Calculation

Details: Understanding inflation helps compare historical prices, assess investment returns in real terms, and make informed financial decisions across different time periods.

4. Using the Calculator

Tips: Enter the original amount in pounds, the year it was from, and the year you want to compare to. The calculator will show the equivalent purchasing power.

5. Frequently Asked Questions (FAQ)

Q1: What is CPI?
A: The Consumer Price Index measures the average change in prices over time that consumers pay for a basket of goods and services.

Q2: Why doesn't my calculation match exact historical prices?
A: Inflation calculations represent averages. Individual items may have appreciated or depreciated at different rates.

Q3: How far back can I calculate?
A: The calculator works for any years with available CPI data (currently 1200-2024).

Q4: Does this account for currency changes?
A: No, this calculator only adjusts for inflation within the same currency system.

Q5: What's the difference between CPI and RPI?
A: RPI (Retail Price Index) includes housing costs and uses a different formula. CPI is now the UK's official inflation measure.