What is inflation?
Inflation is the rise in the prices of everyday things over time. In the US it’s usually measured by the Consumer Price Index (CPI), which tracks the cost of a typical basket of goods and services. The Federal Reserve’s 2% target uses a related measure, the PCE price index.
Some inflation is normal. The problem is high inflation: if prices rise faster than your pay or your savings, you’re getting poorer without noticing.
$100 kept as cash would buy
$74
of today’s shopping
Something costing $100 today
$134
in 10 years
At 3% a year, prices double about every 23 years.
Here’s how much prices have risen in recent years, by the yearly average of the CPI:
| Year | Inflation |
|---|---|
| 2025 | 2.6% |
| 2024 | 2.9% |
| 2023 | 4.1% |
| 2022 | 8.0% |
| 2021 | 4.7% |
| 2020 | 1.2% |
| 2019 | 1.8% |
| 2018 | 2.4% |
| 2017 | 2.1% |
| 2016 | 1.3% |
The 2022 surge is why the Fed raised rates so fast that year and the next. The inflation calculator shows what money from any year since 1913 is worth today.
Why the Fed changes interest rates
The Federal Reserve sets a target for the federal funds rate, the rate banks charge each other overnight. Other rates follow it.
- When inflation is too high, the Fed raises rates. Borrowing gets more expensive, people and businesses spend less, and price rises slow down.
- When the economy is weak, the Fed cuts rates to encourage borrowing and spending.
What it means for you
| What you have | When rates rise |
|---|---|
| Savings account | Pays more, especially high-yield accounts |
| Credit card | Costs more: the rate follows the Fed within a month or two |
| Fixed-rate mortgage | No change to your payment |
| Adjustable-rate mortgage, HELOC | Payments can go up at the next reset |
| New car loan or mortgage | Costs more to take out |
New fixed-rate mortgages follow long-term bond yields more than the Fed’s rate, so they don’t always move together.
Rates right now
The latest averages, which our calculators start from:
| Borrowing | Average rate |
|---|---|
| Prime rate (HELOCs and many cards are priced from it) | 7.00% |
| 30-year fixed mortgage | 7.24% |
| New car loan, 60 months | 7.54% |
| Personal loan, 24 months | 11.90% |
| Credit cards charging interest | 22.36% |
- The prime rate was 7.00% on 23 October 2026 (Federal Reserve).
- Freddie Mac’s average 30-year fixed rate was 7.24% on 29 October 2026.
- New 60-month car loans at banks averaged 7.54% in August 2026 (Federal Reserve).
- 24-month personal loans at banks averaged 11.90% in August 2026 (Federal Reserve).
- Credit cards that charged interest averaged 22.36% in August 2026 (Federal Reserve).
Your own rate depends on your credit score, the lender and the loan. Card rates sit far above the others, which is why paying off card debt is usually the best return you can get.
Beating inflation
What matters is your real return: what your money earns after inflation. Savings paying 4% when inflation is 3% grow by about 1% a year in real terms. Cash that earns nothing loses value every year.
- Keep your emergency fund in a high-yield savings account.
- For goals more than five years away, investing has historically beaten inflation by more. See investing basics.
- Series I savings bonds and TIPS (Treasury Inflation-Protected Securities) are designed to keep pace with inflation.