The March inflation numbers are now out, which means we can now predict the new (May 2012) rate for Series I Savings Bonds…
As a reminder, the rate for Series I Savings Bonds is made up of two pieces: the fixed rate and the variable rate. The fixed rate is set by the feds, and has been at 0% since the fall of 2010. The variable rate is pegged to inflation, and can be easily calculated if you know how much the CPI-U has changed over the past six months. To do this, simply divide the old CPI-U into the new one and you’ll get an estimate of the semi-annual inflation rate. From there, you just double it to estimate the annual change and add the fixed rate.
Back in September, the CPI-U was at 226.889 and by this past March it had increased to 229.392. This works out to a 1.103% increase (229.392/226.889 = 1.01103). If we double this, we get 2.206%, which rounds to 2.21%. So… The variable rate should with to 2.21% starting in May.
As for the fixed rate, I seriously doubt it will be increased from the current 0%, but stranger things have happened. Assuming it remains at 0%, you can either by now and get 3.06% (current variable rate + 0%) for the next six months, followed by 2.21% (new variable rate + 0%) for six months, or you can wait until May 1st and get 2.21% for six months (new variable rate + presumptive fixed rate).
If it were me, I’d probably buy now instead of waiting. What about you? Do you invest in I Bonds? If so, have you already taken the plunge for this 2012?
P.S. I’ve had a couple of people ask me about the best place to find inflation data. I always go straight to the source — the Bureau of Labor Statistics. Here’s a direct link. Check the box under the “Price Indexes” heading for “CPI for All Urban Consumers (CPI-U) 1982-84=100 (Unadjusted)” and click “Retrieve Data.”