| Year | Eroded Value | Cumulative Loss |
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About this tool
Inflation represents the systemic erosion of currency purchasing power over time, driven by macroeconomic supply and demand curves.
Purchasing Power Erosion Formula
The future purchase capacity of a static cash principal is calculated recursively using annual geometric compound erosion rates:
Where:
- PVfuture is the inflation-adjusted purchasing power.
- PVinitial is the starting cash capital principal.
- r is the average annual inflation rate.
- t represents the timeline length in years.
Using this tracker, you can calculate exactly how much purchasing power cash assets lose to systemic inflation cycles if left uninvested.
Frequently asked questions
Everything you need to know about Inflation Calculator.
What inflation rate should I use for my calculation?
For historical calculations, use the published CPI (Consumer Price Index) rate for your country and time period. For future projections, the US Fed targets 2% PCE inflation; historical US CPI has averaged ~3.2% annually over 100 years. Use a range (2%–5%) to see a sensitivity spread rather than a single number.
How does inflation erode purchasing power?
Inflation reduces the real value of money over time. At 3% annual inflation, $100 today buys the same goods as $134 in 10 years — meaning your $100 loses 26% of its purchasing power. The calculator shows the exact future equivalent value of any sum at your chosen rate.
What is the difference between CPI and PCE inflation measures?
CPI (Consumer Price Index) measures the price of a fixed basket of goods and tends to run slightly higher. PCE (Personal Consumption Expenditures) adjusts for consumer substitution (people buy cheaper alternatives when prices rise) and is the Federal Reserve's preferred measure. PCE typically runs 0.2–0.5% below CPI.
Can I model compound inflation rather than simple inflation?
Yes — the calculator uses compound inflation by default, which is the mathematically correct model. Future value = Present value × (1 + rate)^years. Simple inflation would understate the erosion effect over long periods because it ignores the compounding of prior years' price increases.
Does the calculator use real historical inflation data?
You can enter any custom rate. The tool also provides preset rates based on historical US CPI averages for common periods, which you can use as realistic starting points for long-term financial projections.