Definition
CPI is the most widely followed inflation measure, tracking price changes across eight categories: food, housing, apparel, transportation, medical care, recreation, education, and other. CPI-U covers urban consumers (93% of population). Core CPI excludes volatile food and energy for a clearer inflation trend. CPI directly affects TIPS adjustments, Social Security COLAs, and tax bracket indexing.
lightbulb Example
CPI basket weights: housing 36%, food 13%, transportation 16%, medical 7%, education 6%, other 22%. If housing costs rise 5% but everything else rises 2%, CPI = 0.36×5% + 0.64×2% = 3.1%.
verified_user Key Points
- Primary U.S. inflation measure
- Core CPI excludes food and energy
- Directly affects TIPS, Social Security, tax brackets
- Published monthly by Bureau of Labor Statistics