Inflation rates are what allow us to track and measure changes in prices over time. The rate at which prices rise determines a number of facets including how much goods and services cost and the purchasing power of citizens within a country. It can also impact the strength of a country’s currency against other currencies and influence economic growth and employment.
To calculate inflation, analysts take a predetermined basket of goods and services and compare the prices for each item over a set period of time. The price increases for each item are then averaged based on their relative weight in the basket and then the results are divided by the original price and multiplied by 100 to get an inflation rate expressed as a percentage.
A popular measure posted by the Bureau of Labor Statistics (BLS) is the CPI. It compares the current month’s price index to the same month a year earlier to see how prices are changing, adjusting for seasonal variations in some items.
While a little bit of inflation is good for consumers, too much can make it hard to keep up with the costs of daily living and may feel like a pay cut. As such, it’s important to stay on top of inflation trends so that you can plan accordingly and be prepared for potential spikes. A financial advisor can help you create a financial plan to navigate these changes and protect your investments. SmartAsset’s free tool matches you with up to three vetted advisors who serve your area and can interview you at no cost to determine which one is a fit for your goals.