Inflation Calculator — Money Erosion

Discover how much your money is really worth over time. Interactive inflation calculator showing how money erosion affects savings, wages, and purchasing power.

Inflation is the general increase in prices across the economy over time, leading to a decrease in the purchasing power of money. Understanding inflation is essential for any sound financial planning, whether you are saving for retirement, managing a mortgage, or simply trying to preserve your wealth.

What Is Inflation and How Is It Measured?

In Israel, inflation is measured using the Consumer Price Index (CPI), published monthly by the Central Bureau of Statistics. The CPI tracks price changes of a representative basket of goods and services consumed by households. The Bank of Israel targets an annual inflation rate of 1%-3% and uses monetary policy tools to maintain price stability.

Historical Inflation in Israel

Israel experienced hyperinflation in the 1980s, with annual rates reaching hundreds of percent. The 1985 Economic Stabilization Plan successfully tamed inflation, and since the 2000s it has fluctuated around the Bank of Israel's target. In 2022-2023, inflation rose in Israel as well, influenced by global factors such as supply chain disruptions and rising energy prices.

How Inflation Affects Savings, Wages, and Mortgages

Inflation impacts every aspect of financial life. Savings that earn returns below the inflation rate lose value in real terms. Wages that do not keep pace with inflation represent a real decline in living standards. In CPI-linked mortgages, the outstanding principal rises with inflation, causing monthly payments to increase.

Strategies to Protect Against Inflation

There are several ways to protect your money: CPI-linked government bonds provide direct protection against rising prices, real estate tends to appreciate with inflation, stocks and index funds historically deliver returns above inflation over the long term, and diversification across asset classes reduces overall risk.

The Role of the Bank of Israel

The Bank of Israel is responsible for price stability. Its primary tool is the benchmark interest rate — when inflation rises, the bank raises rates to cool demand and slow price increases. When inflation is too low, rates are lowered to stimulate economic activity. Understanding these dynamics helps investors and borrowers anticipate market changes.

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The information on this page is for educational purposes. Please consult a professional before making financial decisions.

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Frequently asked

+−What is inflation?

Inflation is the general increase in prices over time, which leads to a decrease in the purchasing power of money. The same amount of money buys fewer goods and services as time passes.

+−What is the current inflation rate in Israel?

Israel's inflation rate varies from year to year. The Bank of Israel targets an annual inflation rate of 1%-3%. You can check the latest figure on the Central Bureau of Statistics website.

+−How does inflation affect my savings?

If your savings return is lower than the inflation rate, your purchasing power decreases in real terms. For example, if inflation is 3% and your return is 1%, you lose 2% of purchasing power every year.

+−What is the difference between nominal and real value?

Nominal value is the face amount (e.g., NIS 100,000). Real value is the value adjusted for inflation, meaning what you can actually buy with that money. The inflation calculator shows the real value of your money over time.

+−How can I protect my money from inflation?

You can protect your money by investing in CPI-linked bonds, real estate, stocks that tend to outpace inflation over the long term, Hishtalmut funds, and pension funds with appropriate investment tracks.

+−What is the Consumer Price Index (CPI)?

The CPI tracks price changes of a representative basket of goods and services consumed by households. It is the primary tool for measuring inflation in Israel and is published monthly by the Central Bureau of Statistics.

+−Does inflation affect my mortgage?

Yes, especially CPI-linked tracks. In a CPI-linked mortgage, the outstanding principal rises with inflation, so monthly payments increase. Non-linked tracks like Prime or Fixed Unlinked are not directly affected by the CPI.