What is an inflation calculator
Inflation reduces the purchasing power of money over time: with the same amount of dollars, you can buy less and less. This calculator visualizes that effect three ways: projecting what today's amount would need to be in the future in nominal terms, calculating the implied inflation rate when you already know how a price changed between two points in time, and comparing a salary raise against inflation for the period to see whether the increase was real or only nominal.
Formulas used
Purchasing power over time: future value = amount × (1 + rate)^years, and remaining purchasing power is 100 ÷ (1 + rate)^years, as a percentage.
Implied inflation rate: annual rate (%) = ((final value ÷ initial value)^(1 ÷ years) − 1) × 100, and the cumulative inflation is simply the total percentage change between the two values.
Raise vs inflation: the real gain is calculated by dividing the nominal salary growth by the inflation growth for the period: real gain (%) = ((new salary ÷ previous salary) ÷ (1 + inflation)) − 1) × 100.
Worked example: purchasing power over time
With $1,000 and 4.5% annual inflation over 10 years, you would need approximately $1,553 in the future to keep the same purchasing power. Looked at the other way: if you kept $1,000 sitting idle for those 10 years, it would have approximately 64% of its original purchasing power left.
Worked example: implied inflation rate
If a product cost $100 and now costs $150 after 5 years, that represents cumulative inflation of 50% over the period, which works out to an average rate of approximately 8.45% per year.
Worked example: raise vs inflation
With a $3,000 salary raised to $3,150 (a 5% nominal increase) during a period with 4.5% inflation, the real purchasing power gain is approximately 0.48% — small, but positive. To simply keep pace with inflation, the salary would have needed to rise to $3,135.
What the calculator doesn't account for
These calculations use a constant inflation rate that you provide, not official indexes that vary month to month and by product category. For formal decisions (contract adjustments, cost-of-living escalators, salary negotiations), check the official inflation index for the exact period in question, such as the CPI in the United States.