Inflation is the rate at which prices in general rise, and so the rate at which a fixed sum of money buys less. It is measured with a price index: statisticians price a basket of goods and services every month and report how much the whole basket costs compared with a year before. In the UK the Office for National Statistics prices about 700 items for the consumer price index, the CPI, and the government sets the Bank of England a 2% target for its yearly change, as the Bank of England explains. The US CPI-U, published by the Bureau of Labor Statistics, covers urban households, over 90% of the population.
Two index values give you everything else. Cumulative inflation between two years is the later index divided by the earlier one, minus one. The CPI-U annual average was 172.2 in 2000 and 321.943 in 2025, so prices rose 87% over the period and $100 of 2000 money corresponds to $186.96 in 2025. The average yearly rate is a compound figure, (321.943 ÷ 172.2)^(1 ÷ 25) − 1, about 2.53%. Seen from the other side this is a loss of purchasing power: $100 kept in cash since 2000 buys what $53.49 bought then.
Each country names its own index: the Verbraucherpreisindex in Germany, the indice des prix à la consommation in France, the índice de precios de consumo in Spain, the consumentenprijsindex in the Netherlands, the konsumentprisindex in Sweden and the kuluttajahintaindeksi in Finland. Central banks lean against inflation mainly through their policy rate.
The inflation calculator uses each country's official annual index to move sums between years, and the retirement calculator deflates its projection so that every balance also appears in today's money. What a return is worth once inflation is taken off is the real return.