Consumer Price Index (CPI) Explained
The Consumer Price Index (CPI) is the Bureau of Labor Statistics' measure of the average change in prices paid by urban consumers for a fixed basket of goods and services. It is the most widely cited inflation metric in the United States and is used to adjust Social Security benefits, tax brackets, and TIPS (Treasury Inflation-Protected Securities).
CPI Inflation (YoY)
2.43%
Bureau of Labor Statistics
The CPI basket includes eight major categories: housing (shelter), food, medical care, transportation, apparel, recreation, education/communication, and other goods/services. Housing (primarily 'owners' equivalent rent') is the single largest component at roughly 33% of the index. The BLS samples prices monthly from 23,000 retail establishments and 50,000 housing units across 75 urban areas.
? Frequently Asked Questions
What does the CPI measure?
The CPI measures the average price change for a fixed basket of goods and services purchased by urban consumers. It covers housing, food, energy, apparel, medical care, transportation, and other categories.
What is the difference between CPI and core CPI?
Core CPI excludes food and energy prices, which are volatile, to give a clearer picture of underlying inflation trends. The Fed watches core CPI closely when making rate decisions.
What is the difference between CPI and PCE?
The PCE (Personal Consumption Expenditures) deflator is the Fed's preferred inflation measure. It uses a broader basket, adjusts more dynamically for consumer substitution, and typically runs 0.3-0.5 percentage points below CPI.
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