How it is calculated
- Purchasing power after n years = amount ÷ (1 + inflation)n.
- Price after n years = today's price × (1 + inflation)n.
The EU rule. In the EU inflation is measured with the HICP (Harmonised Index of Consumer Prices), published by Eurostat. The European Central Bank aims for 2% inflation over the medium term in the euro area.
Example: Bulgaria. The national figures come from the National Statistical Institute (NSI) and are part of Eurostat's HICP.
Check in your country: your national statistics office publishes the monthly inflation rate; Eurostat compares all EU countries.
The terms in the Glossary
- Inflation — Inflation is the general rise in prices over time, so the same amount of money buys less.
- Real and nominal interest rate — the nominal interest rate is the percentage written in the contract; the real interest rate is that percentage after inf
- Compound interest (compounding and capitalisation) — compound interest is interest charged not only on the starting amount but also on interest already added — which is why
- Return (yield) — return is how much an investment has gained (or lost) over a period, expressed as a percentage of the amount invested —