<p>If you are estimating annual inflation figures, it makes sense to compound them annually.</p>

CC BY-SA 3.0
2015-02-27T16:07:41.790Z
This answer would benefit from an economic or data based argument for the answer it advances.
BKay
CC BY-SA 3.0
2015-02-27T01:55:08.123Z
2015-02-27T01:55:08.123Z
Jamzy
<p>Inflation is the percent change in a price index per unit time. You should compound at the same frequency as the units in the inflation measure. Many reported measures of inflation are year over year measures, which means that even though they may be reported monthly or quarterly they overlap substantially between observations. You want to be sure to handle this properly by choosing non-overlapping intervals.</p>

CC BY-SA 3.0
2015-02-27T13:14:04.000Z
2015-02-27T16:04:21.713Z
2015-02-27T16:04:21.713Z
BKay
<p>For example, 100 dollars is going to be worth less in 30 years, how much less depends on the inflation rate. if we assume a constant annual inflation rate of 3%, should I compound the inflation rate daily or monthly or yearly?
I'm debating mostly between daily and monthly, since the data of inflation rate is collected on monthly  basis. But isn't it happening in real life on a daily basis??
Can someone help me to answer this question and please provide some explanation is possible</p>

<p>Thank you!  </p>

<finance>
At forecasting, should I calculate inflation rate daily, monthly or annualy?
Gugg
# At forecasting, should I calculate inflation rate daily, monthly or annualy?

(Asked by: username_0 on 2015-02-26)

For example, 100 dollars is going to be worth less in 30 years, how much less depends on the inflation rate. if we assume a constant annual inflation rate of 3%, should I compound the inflation rate daily or monthly or yearly?
I'm debating mostly between daily and monthly, since the data of inflation rate is collected on monthly basis. But isn't it happening in real life on a daily basis??
Can someone help me to answer this question and please provide some explanation is possible

Thank you!

**Tags:** finance


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## 2 answers

### Answer by username_2 on 2015-02-27. Score: 2 | Accepted answer

Inflation is the percent change in a price index per unit time. You should compound at the same frequency as the units in the inflation measure. Many reported measures of inflation are year over year measures, which means that even though they may be reported monthly or quarterly they overlap substantially between observations. You want to be sure to handle this properly by choosing non-overlapping intervals.


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### Answer by username_1 on 2015-02-27. Score: 1

If you are estimating annual inflation figures, it makes sense to compound them annually.

> **Comments:**
> **username_2**: This answer would benefit from an economic or data based argument for the answer it advances.  

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