Inflation Calculator

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. If you hold €10,000 today and inflation is 3% per year, that money will only buy what €9,700 could buy one year from now.

For investors, inflation is a hidden tax on wealth. Even "safe" investments like savings accounts lose value in real terms if their interest rate doesn't exceed inflation.

Crypto assets like Bitcoin are often viewed as inflation hedges because their supply is limited (Bitcoin has a 21 million coin cap). However, crypto prices are volatile and don't always correlate with inflation rates.

Stablecoins pegged to fiat currencies (like USDC or USDT) lose purchasing power at the same rate as the underlying currency. If you hold stablecoins during high inflation, your real wealth decreases even though the nominal amount stays the same.

Nominal return is the percentage your investment grows in absolute terms. If you earn 5% interest, that's your nominal return.

Real return adjusts for inflation. If inflation is 3% and you earn 5% nominal, your real return is approximately 2% - that's your actual purchasing power gain.

Example: €10,000 at 5% becomes €10,500 (nominal). But with 3% inflation, that €10,500 has the same purchasing power as €10,194 today (real return ≈ 1.94%).

Inflation is typically measured by tracking the Consumer Price Index (CPI), which monitors the average price change of a basket of goods and services over time.

The formula: Value After Inflation = Initial Value / (1 + Inflation Rate)^Years

This calculator uses this exponential decay formula to show how your purchasing power decreases over time at a given inflation rate.

Inflation varies based on economic factors:

• Money supply: When central banks print more money, each unit becomes less valuable
• Demand vs. supply: High demand with limited supply drives prices up
• Energy costs: Oil and gas prices affect transportation and production costs
• Monetary policy: Interest rates set by central banks influence borrowing and spending

Recent years have seen elevated inflation due to pandemic-related supply chain disruptions, increased money supply, and geopolitical events.

Historical rates (typically 2-3% in developed economies) show past trends and are useful for understanding long-term patterns.

Expected rates depend on current economic conditions. During high-inflation periods, you might use 5-8% or higher. During deflation or low-growth periods, rates could be under 2%.

For planning, consider stress-testing with both optimistic (2%) and pessimistic (6%+) scenarios to understand the range of possible outcomes.