Determining the I Bond Rate

If you currently own I savings bonds, the I bond rate is going to be of particular interest to you. The main purpose of government I savings bonds is to protect bond holders against inflation. With other types of investments, you may or may not keep up with inflation depending on how much interest you make. With this investment, they actually change the rate of interest depending on how much inflation occurred during a given period of time. Here are the basics of how the I bond rate is determined.

Determining the Rate

The United States Treasury announces the rates for the I bond every May 1st and November 1st. The rates that they announce are in direct correlation with how much inflation took place. They determine how much inflation occurred based on the Consumer Price Index and how much it changed during the previous six months. 

Therefore, if the Consumer Price Index tells them that there was 3.2 percent inflation over the previous time period, they adjust the rate that they pay for the bonds up by 3.2 percent. With this method, you can successfully stay even with inflation over the long term. 

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