What is an Inflation Adjustment Clause?

This is a finance-related clause in a contract. It adjusts the relevant payments based upon annual or periodic inflation. 

An inflation clause is generally used to adjust prices or payments due. Simple calculations follow an inflation index; whole complex methods follow the combination of several indexes and prices. 

Generally, the baseline date must be set to start measuring the variability at the commencement of the contract. The level of complexity of the method is a matter of cost-benefit analysis.