Econofact: Are you confused about why there are so many different inflation measures? We can explain.

by | Aug 9, 2022 | Stock Market

The issue: Measuring inflation—the rate of change in the level of prices—requires comparing the prices of a basket of goods and services over time. While that idea sounds straightforward in principle, measuring inflation in practice is more complicated. What goes into the chosen basket of items whose prices are to be tracked over time and how prices of these different components are combined can vary from one inflation gauge to another. Looking ahead to CPI release: U.S. consumers likely got some relief from sizzling price increases in July but Fed won’t feel any better

That being said, no matter how you measure it, inflation is the highest it has been in the United States in decades. Some measures of inflation aim to capture changes in the overall cost of living while others are intended to gauge a more generalized trend. Moreover, the rate of inflation experienced by different households and different sectors of the economy can range widely. Follow the inflation story on MarketWatchThe Facts: The most widely watched and reported measure of inflation is the consumer price index (CPI), compiled by the Bureau of Labor Statistics (BLS) in the Labor Department. In June 2022, the headline CPI indicated that prices were 9.1% higher than a year earlier—a 40-year high. Inflation as measured by the CPI surged since the middle of last year—to rates well beyond what most forecasters had anticipated as the economy first emerged from the pandemic (see chart).


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