1. What is the Inflation Rate?

The inflation rate measures the percentage change in price levels over time, typically calculated using the Consumer Price Index (CPI). It indicates how much prices have increased for a basket of goods and services.

2. How Is The National Inflation Rate Calculated?

The inflation rate is calculated using the formula:

Where:

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

Explanation: The formula compares the change in price levels between two periods, expressing it as a percentage change relative to the original price level.

3. Importance of Inflation Rate

Details: The inflation rate is a key economic indicator used by policymakers, businesses, and consumers to make financial decisions. It affects interest rates, wages, and investment strategies.

4. Using the Calculator

Tips: Enter the current and previous CPI values (unitless numbers). Both values must be positive numbers. The calculator will compute the percentage change between them.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a "normal" inflation rate?
A: Most central banks target 2-3% annual inflation as healthy for economic growth.

Q2: How often is CPI measured?
A: In most countries, CPI is calculated monthly and published by government 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: Why use CPI to measure inflation?
A: CPI represents a basket of goods and services typical consumers purchase, making it a good indicator of living cost changes.

Q5: What causes high inflation?
A: Factors include increased money supply, rising production costs, strong consumer demand, and supply chain disruptions.