“If the current annual inflation rate is only 2.2%, why do my bills seem like they’re 10% higher than last year?” Many of us ask ourselves that question, and it illustrates the importance of understanding how inflation is reported and how it can affect investments. ¹
Inflation is defined as an upward movement in the average level of prices. Each month, the Bureau of Labor Statistics reports on the average level of prices when it releases the Consumer Price Index (CPI).
The CPI is a measure of the change in the prices for a “market basket” of consumer goods and services over a period of time. The CPI is developed from detailed expenditure information provided by families and individuals on what they actually bought in eight major categories: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other groups and services.