See how inflation erodes purchasing power over time using historical US CPI data (1990–2026).
Inflation is the rate at which the general level of prices for goods and services rises over time, eroding the purchasing power of money. The US Bureau of Labor Statistics measures inflation using the Consumer Price Index (CPI-U), which tracks price changes in a basket of everyday goods and services.
Or equivalently: Purchasing power loss = 1 − (1 ÷ (1 + rate)^years)
The US long-run average is ~3.1% annually since 1926. From 2000–2020 it averaged 2.2%. The 2021–2022 surge hit 9.1% — the highest since 1981 — driven by supply chain disruptions and pandemic-era stimulus. The Federal Reserve targets 2% inflation as the long-run equilibrium.
The S&P 500 has delivered ~7% real returns after inflation historically. TIPS (Treasury Inflation-Protected Securities) and I-Bonds directly adjust with CPI. Real estate rents and values typically rise with inflation. Cash savings earning below inflation guarantee a real loss — high-yield savings accounts (4–5% in 2026) roughly break even with current inflation.
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