Guide
I Bond Composite Rate: Fixed, Inflation and the Zero Floor
I bond composite rate = fixed + 2 × inflation + fixed × inflation, with a floor at zero. A worked May 2026 example shows each part and what deflation does.
An I bond's composite rate is not the fixed rate plus the inflation rate. TreasuryDirect gives the formula as "Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)." Each piece does a different job, and one of them has a floor. Understanding the pieces explains why two bonds bought in the same month can earn different rates, and why a bond's rate can fall below its own fixed rate.
The Three Parts
- Fixed rate. TreasuryDirect says, "We announce the fixed rate every May 1 and November 1," and that it applies "for the life of the bond" to bonds issued in the following six months. Treasury states that it "never changes" once a bond is issued.
- Inflation rate. It is reset every May 1 and November 1, so it changes every six months. TreasuryDirect says it is based on the non-seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U), for all items, including food and energy.
- The cross term. The last part of the formula multiplies the fixed rate by the semiannual inflation rate. It exists so that the fixed rate also earns the inflation adjustment, and it is small when both rates are small.
The "2 x" on the inflation rate is there because the inflation rate is a six-month figure and the composite is an annual one.
A Worked Example
Assumptions: the rates for the May 2026 issue period, per the figures on /i-bond-rates: a fixed rate of 0.90% and a semiannual inflation rate of 1.67%. This is an illustration of the formula, not a forecast of any later period.
| Step | Calculation | Result |
|---|---|---|
| Fixed rate | 0.90% | |
| 2 × inflation | 2 × 1.67% | 3.34% |
| Fixed × inflation | 0.90% × 1.67% | 0.015% |
| Sum | 0.90% + 3.34% + 0.015% | 4.255% |
| Composite rate | rounded to two decimals | 4.26% |
The cross term contributes about 0.015 percentage points here. Dropping it would give 4.24%; adding the fixed and inflation rates without doubling the inflation rate would give 2.57%, which is well off the published 4.26%.
What Stays Put and What Moves
For a bond already owned, the fixed rate is the part that is locked at issue. The inflation rate is the part that is replaced every six months, so the composite rate on an older bond is recomputed with the same fixed rate and the newer inflation rate. Two bonds with different fixed rates therefore earn different composites in the same six-month window, even though they share one inflation rate. The I Bond Switch Calculator works on exactly that gap.
When Inflation Is Negative
TreasuryDirect says deflation can pull the composite rate below the fixed rate, as long as the fixed rate is not zero, and that the composite cannot go below zero: "we don't let that happen. We stop at zero." The inputs below are hypothetical, chosen only to show the mechanics:
| Fixed | Semiannual inflation | Raw result | Composite |
|---|---|---|---|
| 0.90% | −0.20% | 0.90% − 0.40% − 0.0018% = 0.4982% | 0.50% |
| 0.90% | −0.50% | 0.90% − 1.00% − 0.0045% = −0.1045% | 0.00% (floored) |
In the first row the composite (0.50%) sits below the 0.90% fixed rate. In the second the raw result is negative, so the floor applies.
Using the Tools
The I Bond Rates by Period tool lists the fixed rate, inflation rate and composite for each six-month period since 1998 and recomputes each composite with this formula. Compare the published figures against your own arithmetic to check the method.
Scope and limits. This guide covers how the rate is built, not what to buy, and it says nothing about purchase limits, tax treatment or redemption rules. Informational only, not financial, tax, or legal advice. Last reviewed: November 2026.
By Eric, WealthExact founder.
Frequently asked questions
Is the I bond composite rate just fixed plus inflation?
No. TreasuryDirect's formula is the fixed rate, plus twice the semiannual inflation rate, plus the fixed rate times the semiannual inflation rate. In the May 2026 example above that gives 4.26%, against 2.57% for a plain sum.
Does the fixed rate on my I bond change?
No. TreasuryDirect says the fixed rate applies for the life of the bond and never changes. The inflation rate is the part that resets, every May 1 and November 1.
Can an I bond's rate go below zero?
No. TreasuryDirect says that if negative inflation would push the composite rate below zero, "we stop at zero." Deflation can still pull the composite below the fixed rate when the fixed rate is above zero.
Which price index sets the inflation rate?
The non-seasonally adjusted CPI-U, for all items, including food and energy, per TreasuryDirect.
Sources
This guide is for informational and educational purposes only. It is not financial, tax, or legal advice. Tax rules are complex, fact-specific, and subject to change. Consult a qualified tax or financial professional before making IRA contribution or conversion decisions.
Last reviewed: November 2026 · Against primary sources cited in the body.