I Bond Rate Likely 6.47% Beginning Nov. 1

Rates on U.S. Treasury Series I bonds will decline soon, the latest inflation data shows.

Inflation continues to run hot but in recent months it has plodded along at a steadier pace compared to the hurdling month-over-month advances made toward the end of last year and the start of this year.

As such, the interest rate for I bonds is poised for a fall in November to 6.47% from the current record rate of 9.62%.

Tied to inflation, Americans have poured over $22 billion into I bonds this year because of the more attractive rates and no-risk returns.

Rates for I bonds change twice a year — once in May and then again in November. Interest accrues monthly and compounds semiannually.

The overall interest rate for an I bond is a combination of a fixed rate and a variable rate tethered to inflation. The Treasury sets the former and the latter is based on changes in the Consumer Price Index (CPI-U). The CPI is a broad measure of what Americans pay for everyday items ranging from eggs to electricity.

The fixed component is very likely to be 0% in the November reset, like it has been since 2020.

The inflation component for the next six-month period is now known as it is found using the change in CPIs from March 2022 to September 2022. (Inflation data for September was released Oct. 13.)

The CPIs for those two months are 287.504 and 296.808, respectively, which represents a 3.236% increase. This increase is multiplied by two and calculates to 6.47% — the expected next I bond rate, provided, of course, the Treasury’s fixed rate remains at 0%.

Here is the actual Treasury formula to calculate an I bond’s overall rate for a new six-month period:

I bond composite rate formula: [fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]

The current 9.62% rate is available through Oct. 28, according to TreasuryDirect.gov where I bonds are purchased. Those bought in October lock in the 9.62% rate for the six months through March. Then in April, they would adjust to the expected 6.47% ⁠rate.

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