The inflation rate formula is simple: take the price index for the current period, subtract the index from a year earlier, divide by the earlier index, and multiply by 100. In the US, the index most people mean is the Consumer Price Index (CPI) from the Bureau of Labor Statistics. Using the official numbers, CPI stood at 336.940 in September 2026 and 324.800 in September 2025, which works out to annual inflation of 3.7%.
Below is the formula step by step, a worked example with real data, and an explanation of where the index numbers come from. For more personal finance and economy explainers, see our money and business guides.
The inflation rate formula
Inflation is a percent change in a price index over time. So the formula is the standard percent-change formula:
Inflation rate = ((CPI in the later period – CPI in the earlier period) / CPI in the earlier period) x 100
Here is how to apply it:
- Pick the two periods you want to compare. For annual inflation, use the same month one year apart.
- Then look up the CPI value for each month. BLS publishes them every month in its CPI news release.
- Subtract the older value from the newer one. That gives you the change in index points.
- After that, divide the change by the older value.
- Multiply by 100 to turn the result into a percentage.
BLS uses exactly this method. Its CPI questions and answers page walks through an example where an index rises from 110.000 to 128.000. The 18-point change divided by 110 gives a 16.4% increase.
A worked example with the latest CPI
The September 2026 CPI release, published October 14, 2026, is the most recent report as of this writing. These are the unadjusted index values for the CPI for All Urban Consumers (CPI-U), from BLS Table 1:
| Month | CPI-U, all items (1982-84 = 100) |
|---|---|
| September 2025 | 324.800 |
| August 2026 | 334.980 |
| September 2026 | 336.940 |
Annual inflation
Start with the 12-month change. The index rose 336.940 – 324.800 = 12.14 points. Then divide: 12.14 / 324.800 = 0.0374. Multiply by 100 and you get 3.74%, which BLS rounds to 3.7%. That matches the headline figure in the release.
Monthly inflation
The same formula works month to month. From August to September 2026, the index rose 1.96 points. Divided by 334.980, that is about 0.59%. However, the release reports a 0.6% monthly rise using seasonally adjusted data. Seasonal adjustment removes patterns that repeat every year, such as holiday sales. So the monthly headline number can differ a little from what you get with the raw index.
For 12-month comparisons, BLS headlines use unadjusted data. Because both months fall in the same season, the seasonal effect largely cancels out.
Where the CPI numbers come from
The CPI tracks the prices that urban households pay for a fixed basket of goods and services. According to BLS, its data collectors record prices for about 80,000 items each month. The basket covers housing, food, energy, cars, medical care, apparel, recreation, education and more.
However, not every item counts equally. Each category gets a weight based on how much households spend on it. Then those weights are drawn from the Consumer Expenditure Surveys, also run by BLS. Since 2023, BLS has updated them every year using a single year of spending data. Starting with January 2026 data, the CPI uses 2024 spending patterns, as shown in its comparison of old and new 2026 weights.
The weights shift a little each month as relative prices change. As of August 2026, BLS listed these shares of the CPI-U basket:
- Shelter: about 35.3%, which makes housing costs the biggest single driver.
- Food: about 13.5%.
- Energy: about 7.4%, including about 3.9% for gasoline.
- Everything except food and energy: about 79.1%.
That weighting explains why a big move in one category can move the whole index. In September 2026, gasoline was up 34.2% from a year earlier. Even with a weight under 4%, it pushed headline inflation well above core inflation, which was 2.6%.
For owner-occupied housing, BLS does not use home prices. Instead, it estimates what owners would pay to rent their own homes, a measure called owners’ equivalent rent. Home purchases are treated as investments, not consumption.
Index points vs percent change
The CPI is an index, not a price. Also, its base period is 1982-84, set equal to 100. So a value of 336.940 means the basket costs about 3.37 times what it did in that base period.
That is why you should never compare raw index points across long stretches of time. A 10-point rise meant far more in 1990, when the index was much lower, than it does today. The percent change fixes that problem, because it measures the rise relative to the starting level.
The same idea also lets you adjust a dollar amount for inflation. Multiply the old amount by the ratio of the new index to the old index:
Value in current dollars = old amount x (CPI now / CPI then)
For example, $100 in September 2025 equals $100 x (336.940 / 324.800), or about $103.74, in September 2026 dollars. The BLS CPI Inflation Calculator does this for any two months since 1913.
Average inflation over several years
If you want the average yearly rate over a longer period, use a compound formula instead of dividing by the number of years:
Average annual rate = ((CPI end / CPI start) ^ (1 / years) – 1) x 100
Here is a made-up example to show the math. If an index rose from 250 to 300 over five years, the total increase is 20%. But the average annual rate is about 3.7%, not 4%, because each year builds on the one before.
CPI-U, CPI-W, core and PCE
Several official measures use the same basic formula, though they track different baskets or groups of people.
| Measure | What it covers | Latest 12-month change | Common use |
|---|---|---|---|
| CPI-U | Urban consumers, over 90% of the population | 3.7% (Sept. 2026) | Headline inflation, many contracts and leases |
| Core CPI | CPI-U minus food and energy | 2.6% (Sept. 2026) | Underlying trend |
| CPI-W | Wage earners and clerical workers, about 30% of the population | Published monthly by BLS | Social Security cost-of-living adjustments |
| PCE price index | All personal spending, including costs paid on your behalf | 3.4% (Aug. 2026) | The Federal Reserve’s 2% goal |
The CPI-W also feeds directly into benefits. The Social Security Administration compares average CPI-W in July through September with the same months a year earlier. On October 14, 2026, it announced a 3.6% cost-of-living adjustment for 2027 on that basis.
By contrast, the PCE index comes from the Bureau of Economic Analysis. It draws on a wider range of spending and updates its weights as people switch products. The BEA August 2026 report put PCE inflation at 3.4% and core PCE at 3.0%. Our explainer on what inflation is covers the differences between these measures and what pushes prices up.
Why your own inflation rate may differ
The CPI is an average for the whole country. Your household spends money differently, so your personal inflation rate can be higher or lower. For example, renters in an expensive city feel shelter costs more. A long-distance commuter feels gasoline more. Someone who rarely drives might barely notice a fuel spike.
BLS also publishes CPI data for regions and large metro areas, including Los Angeles. If you want a rough personal figure, list your main monthly costs, compare each one with a year ago, and weight them by how much you spend. It will not be as precise as the official index, but it shows where the pressure on your budget actually comes from.
The next national CPI report, covering October 2026, is scheduled for November 10, 2026.
This guide is general information, not financial advice.
Frequently asked questions
What is the formula for the inflation rate?
Subtract the earlier CPI value from the later one, divide by the earlier value, and multiply by 100. With September data, (336.940 – 324.800) / 324.800 x 100 gives 3.7% for the year ending September 2026.
How is inflation calculated in the US?
The Bureau of Labor Statistics collects prices for about 80,000 items each month and weights them by household spending. It combines them into the CPI, then reports the percent change from a month earlier and a year earlier.
Why does the monthly CPI change differ from my own math?
Monthly headline figures are seasonally adjusted, while the index values most people look up are not. So your result from raw numbers can be off by a tenth of a point or so. The 12-month figures use unadjusted data and should match.
How do I calculate inflation over many years?
Divide the ending CPI by the starting CPI, raise the result to the power of one divided by the number of years, subtract 1, and multiply by 100. Then you have the average compound rate per year.
Have a question about this topic? Ask in the comments below. Our editors read every comment and answer questions here, and we add useful answers to the guide.
Sources
- bls.gov/news.release/cpi.nr0.htm
- bls.gov/news.release/cpi.t01.htm
- bls.gov/cpi/questions-and-answers.htm
- bls.gov/cpi/tables/relative-importance/weight-update-comparison-…
- bls.gov/data/inflation_calculator.htm
- bea.gov/news/2026/personal-income-and-outlays-august-2026
- ssa.gov/news/en/cola/index.html
- ssa.gov/news/en/advocates/2026-10-14.html