The Economy & the Fed

Consumer Price Index (CPI)

The government’s main measure of how fast prices are rising for ordinary households. Every month the Bureau of Labor Statistics, part of the US Department of Labor, prices a fixed “basket” of tens of thousands of goods and services that people actually buy — groceries, rent, gasoline, doctor visits, car insurance — and reports how much that basket costs compared with a month and a year earlier. That change is what most people mean by “inflation.” The headline version, CPI-U, covers all urban consumers, over 90% of the population; a narrower version, CPI-W, covers wage earners and sets Social Security’s yearly raise. CPI is a lagging indicator: it confirms what prices already did rather than predicting what they will do.

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