How the inflation math actually works
The math is just a ratio of CPI indices: the value of $1 in year A in year B\'s money equals (CPI_B ÷ CPI_A). Multiply by the amount you\'re comparing, and you have the answer. Worked example using US data: $100 from 1990 (CPI 130.7) in 2026 (CPI 332.3) dollars = $100 × (332.3 ÷ 130.7) ≈ $254.30. That\'s a cumulative inflation of 154.3% over 36 years, or roughly 2.65% per year compounded.
What the regions actually measure
- United States — CPI-U (Consumer Price Index for All Urban Consumers). Published monthly by the Bureau of Labor Statistics. Covers a basket of consumer goods and services weighted by urban household spending. Annual average values used here.
- United Kingdom — CPI (Consumer Prices Index). Published monthly by the Office for National Statistics. Replaced RPI as the headline UK measure in 2003. The historical pre-2003 values here are reconstructed from RPIX with adjustments to match the modern CPI methodology.
- Eurozone — HICP (Harmonised Index of Consumer Prices). Published monthly by Eurostat. Common methodology across all eurozone member states, started 1996. Used by the ECB for its 2% inflation target.
Why your personal inflation rate is probably different
The CPI is a weighted average based on a hypothetical median household. Your actual basket is not the median. If a disproportionate share of your spending goes to rent, groceries or childcare — three categories that have risen faster than headline CPI through 2022–2024 — your personal inflation rate is meaningfully higher than the official number. If you own your home outright and don\'t commute, your personal inflation might be lower.
The calculator above uses the official headline figure. For decisions about your own purchasing power, it\'s a starting point, not the last word. We covered this in detail in the blog post on inflation versus pay rises.
The two highest-inflation periods in recent memory
Looking at the US data, two periods stand out:
- 1979-1981 (oil crisis). US annual inflation peaked at 13.5% in 1980. A dollar from 1979 lost about a quarter of its purchasing power across three years.
- 2021-2023 (post-COVID). US CPI rose from 271.0 in 2021 to 304.7 in 2023, a 12.4% cumulative move in two years. The fastest sustained inflation since the early 1980s, before settling back to roughly 3% per year through 2024–2026.
The UK and Eurozone show similar patterns at different magnitudes. The UK peaked higher in 2022 (about 11% annual); the Eurozone, with its larger underlying economy and tighter ECB policy, peaked lower at around 9.2%.
Annualized vs cumulative: which number matters when
The calculator returns both:
- Cumulative inflation is the total percentage rise across the entire period. Useful for understanding "how much has my money lost" in absolute terms.
- Annualized rate is the geometric mean annual rate that would produce the cumulative result. Useful for comparing periods of different length on a like-for-like basis.
A 30-year cumulative inflation of 150% sounds dramatic. The annualized rate is 3.07% — the kind of inflation most central banks consider acceptable. Both numbers are correct; they tell different stories.
Where to go from here
- Plug your old salary into the calculator above to see what it should be in today\'s dollars. The gap between that and your actual salary is your real raise (or real cut).
- Compare your investment returns to the inflation rate over the same period. A 5% nominal return over 5 years at 3% inflation is 1.94% real — not 2%.
- For specific-good price tracking (a single product\'s price history), the headline CPI is a poor proxy. Use the BLS or ONS detailed-category index instead.
Want to extend the math forward? Run a compound interest calculation at 2-3% annual inflation to see what an amount today will need to grow to in 10, 20, or 30 years just to keep up.
CPI data are annual averages, drawn from BLS, ONS and Eurostat publications. 2026 figures are based on data through the most recent available release and are subject to revision in subsequent publications.