Consumer Price Index (CPI)
What Is Consumer Price Index (CPI)?
The Consumer Price Index (CPI) measures the average change over time in the prices paid by consumers for a representative basket of goods and services. It is published monthly by the Bureau of Labor Statistics (BLS) and is the most widely cited gauge of U.S. inflation. The basket spans categories such as food, energy, transportation, medical care, and shelter, with shelter (housing costs) typically making up the largest single share. Readings are usually reported both as raw and seasonally adjusted figures, and inflation is most often quoted as the year-over-year percentage change in the index. The CPI is the standard real-world example of a price index, the broader concept used to measure inflation and to convert nominal dollar amounts into inflation-adjusted, or real, values.
Why It Matters
The CPI matters because it touches household budgets and public policy directly. It is used to calculate cost-of-living adjustments (COLAs) for Social Security benefits, and it anchors many wage contracts and tax brackets. Its swings capture major economic events: headline CPI inflation peaked near 9% year-over-year in June 2022, the hottest reading of the recent surge, and fell close to 0% in 2015 amid collapsing oil prices, while the 1973 OPEC oil embargo drove an earlier spike. Although the CPI is the most familiar inflation measure, the Federal Reserve officially prefers the PCE price index for its 2% target, because the two weight categories and gather data differently. Tracking the CPI helps people see how the purchasing power of a dollar changes over time.