The Inflation Rate Multiplier (IRM) is the change in consumer prices from one state fiscal year to the next. It is used for two purposes: 1) to determine the change in a property's taxable value (which is limited to the lesser of the IRM or 5%) and 2) it is used to calculate to the "Headlee" Millage Reduction Fraction (MRF) for local and regional millage rates. Regarding purpose #1, it is worth noting that limits to the change in a property's taxable value do not apply when the property is sold, or experiences demolitions and/or additions. The Observed Inflation Rate Multiplier is the official IRM for that fiscal year (and is applied to the following assessment year), while the Estimated Inflation Rate Multiplier provides an early assessment of where the Observed IRM will fall. Having an early assessment of the IRM helps aids local governments in their fiscal planning.