What is inflation adjustment factor?

The inflation adjustment factor is a numerical value used to adjust financial figures, such as prices or wages, to account for changes in the purchasing power of money over time due to inflation. It helps to maintain the real value of money by reflecting how much prices have increased since a specific base year. This factor is often calculated using indices like the Consumer Price Index (CPI) and is essential for accurate financial analysis, long-term contracts, and historical comparisons.