Measuring Inflation

The most common measure of inflation is the Consumer Price Index (CPI), which is computed each month by the U.S. Bureau of Labor Statistics. The index tracks the percentage change in prices of a basket of 80,000 goods and services and is measured against the reference period 1982-1984. CPI determines adjustments in Social Security payments, federal income-tax brackets and a variety of other payments and charges. Though CPI is the most relied-upon measure of inflation, some economists believe it exaggerates the inflation rate by approximately 1.5%.