How the I Bond Interest Rate Is Calculated

Series I savings bonds are built to keep pace with inflation, and the U.S. Treasury publishes exactly how their interest rate is set. The rate is not a single number chosen each year. It is a combination of two parts, run through a formula, and it changes every six months. Knowing the formula helps you read the announced rate and understand what can make it rise, fall, or stop at zero.

1. The two parts

According to TreasuryDirect, the interest on an I bond combines:

• A fixed rate. You know it when you buy the bond, and it never changes for the life of that bond. Treasury announces a new fixed rate every May 1 and November 1, and it applies to all I bonds issued in the following six months.
• An inflation rate. It changes every six months for all I bonds ever issued. Treasury bases it on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U), for all items including food and energy.

2. The formula

TreasuryDirect gives the composite rate formula as:

Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)

The inflation rate is stated for six months, so it is doubled to make it annual. The last term is a small cross-product that accounts for the two parts interacting.

3. The current rate, worked through

As of October 14, 2026, for I bonds issued May 1, 2026 through October 31, 2026, TreasuryDirect lists a fixed rate of 0.90% and a semiannual inflation rate of 1.67%. Plugging those in:

That 4.26% is a yearly rate that applies for six months. Treasury sets the next fixed and inflation rates on November 1, 2026, so these figures are only current until then. Treasury notes that the combined rate is sometimes called the composite rate or the earnings rate.

4. How the interest is actually added

I bonds earn interest from the first day of the month you buy them. Twice a year, Treasury adds the interest earned in the previous six months to the bond's principal value, and the next rate applies to that new, larger value. This is semiannual compounding.

As a simple illustration, if a bond worth $5,000 earned the 4.26% composite rate for a full six-month period, half the yearly rate would be added: $5,000 x (1 + 0.0426 / 2) = $5,106.50. The next six-month rate would then apply to $5,106.50, not to $5,000.

Your bond's rate changes every six months from its own issue date, not on May 1 and November 1 for everyone, so two people holding bonds bought in different months can be earning different rates at the same time.

5. What deflation does

Prices can fall, and the formula handles that. Treasury explains that deflation can bring the combined rate below the fixed rate. However, if the inflation rate is so negative that it would pull the combined rate below zero, Treasury stops at zero.

Two hypothetical examples with the 0.90% fixed rate:

• Semiannual inflation of -0.30%: 0.0090 + (2 x -0.0030) + (0.0090 x -0.0030) = about 0.30%. The bond still earns a small positive rate.
• Semiannual inflation of -0.60%: the formula gives about -0.31%, so the rate is set to 0%. The bond's value does not go down.

6. Cashing out early

TreasuryDirect notes that if you cash a bond before it is 5 years old, you do not receive the last 3 months of interest. That is why values shown for bonds younger than 5 years leave out the most recent 3 months. I bonds keep earning interest until you cash them or they reach 30 years old.

7. How this differs from TIPS

Treasury also sells Treasury Inflation-Protected Securities, or TIPS, in 5, 10, and 30-year terms. TIPS work differently: their principal goes up or down with inflation, and they pay a fixed rate of interest every six months on that adjusted principal. At maturity you receive the adjusted principal or the original amount, whichever is higher. TIPS can also be sold before maturity, so their market value can move, while an I bond is redeemed with Treasury.

8. Key takeaways

• The I bond composite rate is fixed rate + (2 x semiannual inflation) + (fixed x semiannual inflation).
• For bonds issued May through October 2026, a 0.90% fixed rate and 1.67% semiannual inflation give a 4.26% composite rate.
• Interest is added to the bond's value every six months, so later rates apply to a larger balance.
• In deflation the rate can fall below the fixed rate, but Treasury does not let it go below zero.
• Cashing in before 5 years costs the last 3 months of interest.