1. What is Inflation Rate?

The inflation rate measures the percentage change in the Consumer Price Index (CPI) over time, indicating how much prices for goods and services have increased. It's a key economic indicator used by governments, businesses, and consumers to understand purchasing power changes.

2. How Does the Calculator Work?

The calculator uses the standard inflation rate formula:

Where:

• \( \text{CPI}_{\text{new}} \) — Current Consumer Price Index value
• \( \text{CPI}_{\text{old}} \) — Previous Consumer Price Index value

Explanation: The formula calculates the percentage change between two CPI values, showing how much prices have increased (positive inflation) or decreased (deflation).

3. Importance of Inflation Rate

Details: Inflation rate is crucial for economic planning, interest rate decisions, wage negotiations, and investment strategies. Central banks use it to guide monetary policy, while businesses use it for pricing decisions.

4. Using the Calculator

Tips: Enter both current and previous CPI values (unitless numbers typically around 100-300 for most countries). The previous CPI must be greater than zero for calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a "normal" inflation rate?
A: Most central banks target 2-3% annual inflation. Hyperinflation occurs when rates exceed 50% per month.

Q2: How often is CPI measured?
A: Typically monthly in most countries, with annual figures being most commonly reported.

Q3: What's the difference between CPI and inflation rate?
A: CPI is an index number, while inflation rate is the percentage change in CPI over time.

Q4: Can inflation rate be negative?
A: Yes, negative inflation is called deflation, indicating falling prices.

Q5: Why is some inflation considered good?
A: Mild inflation encourages spending and investment, while deflation can lead to economic stagnation.