Eagle carrying hat filled with I bonds
The March CPI data was released recently.  That means we can now estimate what the new I bond inflation rate will be for the upcoming May 1 change.

 

I bonds

We now have the data to estimate what the new I bond inflation rate will be for the upcoming May 1 change.

I bonds pay a combination of a fixed rate and an inflation rate.  The current rate through April 30, 2023 is 6.89%.  This is made up of 0.4% fixed rate + 6.48% inflation rate.

Every May 1 and November 1 the U.S. Treasury announces the I bond fixed rate and inflation rate.  The U.S. Treasury does not tell us how the fixed rate is determined.  However, we can estimate the I bond inflation rate.

How the I bond Inflation Rate is determined

The inflation rate can, and usually does, change every 6 months.  According to treasurydirect.gov, the inflation rate on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U)> for all items, including food and energy.

We now have the CPI date from September 2022 to March 2023 to estimate the I bond inflation rate.  The predicted new rate is 3.39%.  Here is a table with the CPI data and six-month change. 

MonthObservation Value6-month change x 2
2022 Sep296.808  
2022 Oct298.012  
2022 Nov297.711  
2022 Dec296.797  
2023 Jan299.170  
2023 Feb300.840  
2023 Mar301.8361.69%3.39%

The six month change in CPI was 1.69% which you need to multiply by 2 to get the annual rate of 3.39%.

Source of data: https://data.bls.gov/cgi-bin/surveymost

Buy Now or Buy Later

The question for all of us is should I buy I Bonds now or wait until after May 1?

With the inflation rate changing from 6.45% to 3.39%, that is about a 3% drop.  It seems pretty compelling to buy I bonds before April 28.

If you think the fixed rate is going up much higher than the current 0.4%, you could wait.  Remember that fixed rate could also drop to zero.

I bond historical rates

Maybe looking at historical data will help you with this decision.  Let’s look at the past several years of I bond interest rate data.  Here is a chart going back to May 2015, the last time there was a negative 6-month inflation rate.

 Fixed Rate6 month Inflation RateAnnualized Inflation RateTotal I bond rate
Nov-220.40%3.24%6.48%6.89%
May-220.00%4.81%9.62%9.62%
Nov-210.00%3.56%7.12%7.12%
May-210.00%1.77%3.54%3.54%
Nov-200.00%0.84%1.68%1.68%
May-200.00%0.53%1.06%1.06%
Nov-190.20%1.01%2.02%2.22%
May-190.50%0.70%1.40%1.90%
Nov-180.50%1.16%2.32%2.83%
May-180.30%1.11%2.22%2.52%
Nov-170.10%1.24%2.48%2.58%
May-170.00%0.98%1.96%1.96%
Nov-160.00%1.38%2.76%2.76%
May-160.10%0.08%0.16%0.26%
Nov-150.10%0.77%1.54%1.64%
May-150.00%-0.80%-1.60%0.00%

 

 

Conclusion

As the saying goes, a bird in the hand is better than two in the bush.  The Moven Maven thinks rather than risking the 3..09% difference in interest for 6 months by betting on a higher fixed rate – buy now.  You should not wait until April 28 to buy.  The treasury direct website has gotten overwhelmed at times.  If you want the current rate of 6.89%, buy your I bonds soon.

 

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