Inflation Report Sets I Bond's New Variable Rate At 1.40%

Apr. 10, 2019 10:09 AM ETTIP8 Comments
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  • Energy prices drove overall inflation up sharply in March, giving a boost to the I Bond's variable rate calculation.
  • I Bonds purchased before May 1 will offer an overall one-year return of 2.4%, but most importantly will carry a permanent fixed rate of 0.5%.
  • My advice continues to be: Buy I Bonds up to your full allocation before the fixed rate is reset on May 1.

U.S. inflation surged a bit in March, the Bureau of Labor Statistics reported today, providing the final piece of data needed to set the new inflation-adjusted variable rate for U.S. Series I Savings Bonds.

The BLS set the March index for non-seasonally adjusted inflation at 254.202, an increase of 0.56% over the February number. The I Bond's new variable rate, which will go into effect May 1, is based on non-seasonally adjusted inflation from September 2018 to March 2019.

Because inflation increased 0.70% (rounded from 0.698%) over that period, the I Bond's new variable rate will be set at 1.40%, boosted by two recent months of relatively strong inflation. But that is still lower than the current annualized rate of 2.32%, available for I Bond purchases through April 30.

The inflation-adjusted variable rate lasts six months, and is combined with an I Bond's permanent fixed rate (currently 0.50%) to create an I Bond's composite rate.

Here are the numbers used in the variable-rate calculation:

Inflation and I Bonds(Source:

I Bonds purchased before May 1 will receive the current fixed rate of 0.50%, along with a variable rate of 2.32% for six months, and then 1.40% for six months. Overall, that will provide an average return of about 2.4% over one year.

I am recommending buying I Bonds up to the full allocation ($10,000 per person per year) before May 1, to capture that 0.50% fixed rate, which is highly likely to fall when it is reset on May 1. The fixed rate is permanent, lasting until the I Bond is redeemed or matures in 30 years.

I'll be writing more about the fixed rate and overall I Bond prospects in an article later this week.

Inflation jumped in March

The Consumer Price Index for All Urban Consumers increased 0.4% in March on a

This article was written by

Tipswatch profile picture
I am no longer writing for this site. More details. I will continue to post updates at my site, Enna is a long-time journalist based in Charlotte, N.C. A past recipient of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website. The Tipswatch blog, which launched in April 2011, explores ideas, benefits and cautions about U.S. Series I Bonds and Treasury Inflation-Protected Securities, which David believes are an under-appreciated and under-used investments. David has been investing in TIPS and I Bonds since 1998.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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