How to Calculate the Inflation Rate

The inflation rate is the percentage change in a price index (like CPI) between two years.

Formula

Inflation rate = [(CPI₂ − CPI₁) ÷ CPI₁] × 100

1
Get the price index for both years. Usually the Consumer Price Index (CPI) for the earlier and later year.
2
Subtract. Find the change: CPI₂ − CPI₁.
3
Divide by the starting value. Divide the change by the earlier year's CPI.
4
Convert to a percent. Multiply by 100. A negative result is deflation.

If CPI was 240 last year and 252 this year, inflation = [(252 − 240) ÷ 240] × 100 = 5%.

How do you calculate CPI itself?

CPI = (cost of the market basket in the current year ÷ cost of the same basket in the base year) × 100.

What is the difference between inflation and deflation?

Inflation is a rising price level (positive rate); deflation is a falling price level (negative rate). Disinflation is a slowing positive rate.