# Why is there a discrepancy between current inflation rate and I bond rate in the US?

According to https://www.rateinflation.com/inflation-rate/usa-inflation-rate/, the November 2022 inflation rate is 7.11%, but the I Bond rate according to Treasury Direct is 6.89% (from November 2022 to April 2023). I know that there is a positive correlation between inflation rate and I bond rate, but why could be factors that could contribute to the discrepancy of one being 7.11% (I've compared multiple resources and 7.1% or 7.11% seem to be the one reported) and another being 6.89%?

• 6.89 is not inflation but the combined rate as per my other answer (I compute the values). The other answer may be misleading as they are only partially derived from inflation BUT not determined by inflation alone (although linked does not imply it is the only factor - it just does not mention another). Also, the rate is set on 1st of November, you do not even know the November rate yet. (which is a rate of change to the previous year). Jan 3, 2023 at 21:10
• Thanks. What do you mean by "the rate (what rate?) is set on 1st of November, you do not even know the November rate yet. (which is a rate of change to the previous year)"? Jan 3, 2023 at 21:18
• @HelloDarkWorld Rate for I bonds is set every half a year on November 1st and May 1st. Jan 3, 2023 at 21:30
• They pay interest as high as inflation? That sounds too good to be true. What's the catch? Jan 4, 2023 at 7:26

The "inflation rate" for the i-bond is based on the past 6 months of CPI values, not a whole year.

• what about the inflation rate for November 2022 of 7.1% based on multiple resources? Are they based on the past 6 months or? Jan 3, 2023 at 22:51
• 12 months (year-over-year) Jan 3, 2023 at 22:54

It takes time to compute inflation. That's why the reset inflation rate in May and November does not use the values for May and November inflation (it is not yet available when the rate is announced). Conventionally, percentage values are computed as year over year YoY), meaning Nov21 - Nov22 in your example. Also, there are several inflation series available; seasonally adjusted or unadjusted, including or excluding volatile products like food and energy and the like. Details about the design of inflation indices would be a seperate (complex) question.

In any case, what is used to compute inflation for I bonds is this series, found in the section where it reads

Finally, the next grouping of data shows actually CPI figures from 1913 to present.

All Urban Consumers – (CPI-U) 1913-2022*

The computation is like this

For 1st of Nov, the inflation values (not percentage values, but the actual index value) for March to September are used because it is semi-annual and as mentioned above, the latest values are not available yet: 2968.08/2875.04 =3.24%, because it is rounded to two decimal places).

That is the inflation rate I showed in my other answer.

This answer replicates the calculation of the current value on the website of TreasuryDirect.

This answer explains why the formula

Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]

is designed like that.

• 1st of Mai value is Mar 22 / Sep 21 (287.504/274.31) which is 4.81% on so forth. Jan 3, 2023 at 22:14
• Noc 22 CPI in % is change to the previous year (Nov 21) . 297.711/277.948, hence 7.11% according to this series. Note, inflation can be computed in numeous ways, and be seasonally adjusted, non seasonally adjusted... The link i provide above is the one used for I Bonds. Jan 3, 2023 at 23:06