Question 1

What is the average US inflation rate?

Accepted Answer

The US Federal Reserve targets 2% annual inflation. The historical average since 1913 is approximately 3.1% per year. Recent years have seen higher rates — 2022 peaked at 9.1% before moderating.

Question 2

How does inflation affect purchasing power?

Accepted Answer

Inflation reduces the purchasing power of money over time. At 3% annual inflation, $100 today will only buy what $74 buys today after 10 years — a 26% loss in real purchasing power.

Question 3

How do I protect money from inflation?

Accepted Answer

Common inflation hedges include investing in stocks (historically outpace inflation), I-bonds (rate adjusts with CPI), real estate, and TIPS (Treasury Inflation-Protected Securities). Keeping excess cash in a savings account at rates below inflation results in a real loss.

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