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How to Calculate Inflation Rate? The Ultimate Guide
Last Updated: 11th December 2025 - 09:42 am
Inflation affects your finances directly; but there are many ways to determine what will be an accurate rate of inflation. Put simply, inflation quantifies the increasing cost of goods and services over time, which impacts the true value of the money. By understanding inflation and its effect on your investments, savings, and monthly expenditures, you will be better prepared to handle the financial decisions.
The CPI inflation rate is based on a more comprehensive collection of products and or services than just food, transport, utilities, and clothing. CPI offers a detailed overview of an economy's price changes and inflation calculations.
Knowing how to calculate inflation rate is of prime importance for overall financial planning. If your salary hikes or returns on savings do not match inflation, your purchasing power declines gradually. Tracking inflation also helps you make smarter financial decisions, whether it is choosing fixed deposits, bonds, or planning expenses.
Not all categories increase at the same pace. Food and fuel often increase faster than other categories. Recognising these trends helps you plan your spending and adjust investments accordingly. Once you understand CPI inflation calculation and the basics of the inflation rate formula, inflation stops being just a number, it becomes a practical tool for daily financial decisions.
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