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How to calculate monthly inflation from CPI

Personal Finance & Money Asked by Rutkay Karabulak on January 8, 2021

I have data that consists of dates and monthly CPI belong to that date. And I’m trying to find Inflation belongs to specific date, for instance inflation at 2015-02.

Monthly CPI

I used this formula to calculate for example inflation rate in 2016-01

((i/l)-1)*100 = inflation rate 
i = CPI value of the current month
l = CPI value from 12 month ago

( (-1,90 / -1,60) – 1 ) * 100 = 18,75

But it doesn’t make sense because result of formula is 18,75 but the real inflation rate at 2016-01 is different.

Also, for some other month I found -73,68 value from that formula, It also doesn’t make sense at all.

How can i find monthly inflation according to specific CPI value belongs to that month?

One Answer

Looks like you have monthly inflation percentages, so you should compound the values, e.g.

Feb   = 100.  * (1 + 0.002) = 100.2
March = 100.2 * (1 + 0.006) = 100.801

 month     %     index
2015-01    -    100
2015-02   0.2   100.2
2015-03   0.6   100.801
2015-04   0.9   101.708
2015-05   0.5   102.217
2015-06   0.3   102.524
2015-07  -0.9   101.601
2015-08  -0.3   101.296
2015-09  -0.3   100.992
2015-10   0.6   101.598
2015-11   0.4   102.005
2015-12  -0.3   101.699
2016-01  -1.9   99.7663

Then the annual inflation since Jan is 99.7663/100 - 1 = -0.23374 %

Correct answer by Chris Degnen on January 8, 2021

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