2024
Inflation Cooled in 2024 — "Cooled" Still Means Compounding
What happened
US inflation, measured by the Consumer Price Index, cooled substantially through 2024 — running at roughly 2–3% year-over-year, down from a peak of 9.1% in June 2022, the highest reading in four decades.
Why it matters
A lower inflation rate is genuinely good news — it means prices are rising more slowly. But "more slowly" is not "not at all." Even at a "normal" 2–3% rate, prices compound the same way an investment does: a smaller number, applied every year, for years. The 2022 peak already happened and isn't reversed by a lower rate now — it's a permanent step up in the price level that this year's inflation then builds on top of.
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At today's lower-but-still-real inflation rate, what does that actually do to what a fixed amount of spending can buy a few years from now?
Needed in 5 years to buy what $50,000 buys today
$57,964
- Today's equivalent spending
- $50,000
- Purchasing power of $50,000 in 5 years
- $43,130
- Cumulative price increase
- 15.93%
- 3% average annual inflation (roughly 2024's pace), 5-year horizon
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Related tools
Terms used here
Sources
- Consumer Price Index news releases — U.S. Bureau of Labor Statistics, 2024