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 risen. It's a key economic indicator that affects purchasing power, interest rates, and economic policy.

2. How Does the Calculator Work?

The calculator uses the 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 over the measured period.

3. Importance of Inflation Rate

Details: Inflation rate is crucial for economic planning, adjusting wages and pensions, setting interest rates, and making investment decisions. Central banks use it to guide monetary policy.

4. Using the Calculator

Tips: Enter the previous CPI value and current CPI value (both must be positive numbers). The calculator will show the inflation rate as a percentage.

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: In most countries, CPI is calculated monthly by statistical agencies.

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 be negative?
A: Yes, negative inflation is called deflation, which can be harmful to economies.

Q5: Why does inflation matter to ordinary people?
A: Inflation erodes purchasing power - your money buys less over time when inflation is high.