CPI Inflation Calculator Review

What is CPI

A consumer price index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.

National CPI data are released each month by the Bureau of Labor Statistics (BLS) within two weeks of the month end. So, for example, CPI for January is available in mid-February.

What is CPI Inflation Calculator

The CPI Inflation Calculator extracts the latest data from the Bureau of Labor Statistics. The All-Items CPI, used by this calculator to calculate inflation rates in the United States, was last updated on June 16th 2015 for the month of May 2015.

How to Use The CPI Inflation Calculator?

Enter a dollar amount in the “cost” field, then select the years that you would like to compare. The years must be between 1913 and 2014, and the dollar amount must be between \$1 to \$10,000,000. For example, if you would like to know the difference between the value of \$100 in 2015 versus \$100 in 1995, type 100 in the “costing” field, type 1995 in the first year field, and 2015 in the second one. When you click on “Calculate”, it will display the result and a chart.

How Does This Calculator Work Exactly?

As mentioned above, this inflation calculator uses the CPI (Consumer Price Index) rates from the Bureau of Labor Statistics. Rates are available from 1913 to 2014. New rates are published every month on the BLS website and are available publicly. Our calculator’s script extracts the rates for the selected dates and instantly calculates the result.

What is The Link Between CPI and Inflation?

The CPI is used by government agencies, banks and different entities to measure the effectiveness of fiscal and monetary policy, and to determine when that policy needs to be adjusted. The CPI basically correlates with purchasing power. When you hear the terms ‘in today’s dollars,’ or ‘adjusted for inflation,’ the values discussed have been adjusted by using the CPI in order to reflect true purchasing power, or the amount a dollar will buy, at different times in history.

How CPI is Used

As an economic indicator: The CPI is the most widely used measure of inflation and is sometimes viewed as an indicator of the effectiveness of government economic policy. It provides information about price changes in the nation’s economy to government, business, labor, and other private citizens, and is used by them as a guide to making economic decisions. In addition, the President, Congress, and the Federal Reserve Board use trends in the CPI to aid in formulating fiscal and monetary policies.

As a deflator of other economic series: The CPI and its components are used to adjust other economic series for price changes and to translate these series into inflation-free dollars. Examples of series adjusted by the CPI include retail sales, hourly and weekly earnings, and components of the national income and product accounts. An interesting example of this is the use of the CPI as a deflator of the value of the consumer’s dollar to find its purchasing power. The purchasing power of the consumer’s dollar measures the change in the value to the consumer of goods and services that a dollar will buy at different dates. In other words, as prices increase, the purchasing power of the consumer’s dollar declines.

As a means of adjusting dollar values: The CPI is often used to adjust consumers’ income payments, (for example, Social Security); to adjust income eligibility levels for government assistance; and to automatically provide cost-of-living wage adjustments to millions of American workers. The CPI affects the income of about 80 million persons as a result of statutory action: 48.4 million Social Security beneficiaries, about 19.8 million food stamp recipients, and about 4.2 million military and federal Civil Service retirees and survivors. Changes in the CPI also affect the cost of lunches for 26.5 million children who eat lunch at school, while collective bargaining agreements that tie wages to the CPI cover over 2 million workers. Another example of how dollar values may be adjusted is the use of the CPI to adjust the federal income tax structure. These adjustments prevent inflation-induced increases in tax rates, an effect called “bracket creep”.

What is new in CPI Calculation

Effective with the release of the January 2015 CPI on February 26, 2015, the Bureau of Labor Statistics will utilize a new estimation system for the Consumer Price Index. The new estimation system, the first major improvement to the existing system in over 25 years, is a redesigned, state-of-the-art system with improved flexibility and review capabilities. For more information on this new system, please see http://www.bls.gov/cpi/cpinewest.htm.

Readers should make use of the free inflation calculator to understand their purchasing power. Employer can use this to calculate average increment for their employees. Producers can calculate the ideal price increase of their products. Their are so many good uses of this calculator.

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