The rate and the level
A price index describes a price level relative to its chosen base. Inflation describes the percentage change in that index over an interval. If an index moves from 100 to 110 and then to 115.5, inflation is 10% over the first interval and 5% over the second. The level is higher after both intervals.
Disinflation is a slower rate of price growth. Deflation is a decline in the price level. These are different outcomes. A positive inflation rate that falls from 10% to 5% is disinflation; an index declining from 110 to 104.5 represents a 5% price decline over that interval.
A base of 100 is a reference
An index base is a scaling convention, not a dollar cost. An index value of 120 does not mean a basket costs $120, nor does it mean prices rose 120%. When the base is 100, a later reading of 120 implies a 20% increase relative to the base period, provided the series is comparable.
Two places can use different index bases, baskets and covered populations. Their CPI index levels do not establish which place is more expensive. CPI is designed to measure change. For spatial price levels, BEA regional price parities address a different question and require their own coverage and definitions.
Calculate purchasing power with matching indexes
To express an amount in the equivalent price level of another period, multiply by the ending price index and divide by the starting index. Use the same series and adjustment at both endpoints. Combining an adjusted numerator with an unadjusted denominator introduces a mismatch.
The inflation calculator uses monthly national CPI-U unadjusted values. Its result is an illustrative basket-based equivalent, not a household-specific budget or a future price forecast. Differences in food, shelter, energy and other purchases can make a household’s actual experience differ from the aggregate.