Definition
The Consumer Price Index is a price index published every month by the US Bureau of Labor Statistics (BLS). It tracks what it costs to buy the same basket of goods and services – rent, food, gasoline, clothing, medical care, car insurance and so on – from one month to the next. The index itself is just a level (the 1982–84 average is set to 100), so on its own it says little. What people usually mean by “CPI” is its percentage change over 12 months, which is the headline US inflation rate.
How it works
BLS staff collect prices from stores, landlords, utilities and websites in cities across the country. Each item is weighted by its share of household spending, taken from the Consumer Expenditure Survey: housing costs carry the largest weight, while something like postage barely registers. The best-known version, CPI-U, covers all urban consumers – more than 90% of the population. The inflation rate is then simply:
Inflation rate = (CPI this month ÷ CPI 12 months earlier − 1) × 100
Because the comparison is with the same month a year earlier, seasonal swings cancel out, which is why the 12-month figure uses the not-seasonally-adjusted index.
Example
Suppose the index stood at 300.0 last September and 309.0 this September. Prices rose by 9.0 ÷ 300.0 = 3.0% over the year. A household that needed $4,000 a month for its usual spending would now need about $4,120 for the same things. If the index then rises only to 315.2 the following September, inflation has slowed to about 2.0% – but prices are still higher than ever. Slower inflation (disinflation) is not the same as falling prices (deflation).
CPI in history
Readings at turning points, taken from the same data as the chart above.
| Date | CPI inflation | What was happening |
|---|---|---|
| Jun 1920 | 23.7% | Peak of the post–World War I price surge, the highest reading on record. |
| Jun 1921 | −15.8% | One year later prices were falling fast: the sharpest deflation on record. |
| Oct 1932 | −10.7% | Great Depression: prices fell for about four years in a row. |
| Mar 1947 | 19.7% | Wartime price controls ended and pent-up demand pushed prices up. |
| Mar 1980 | 14.8% | Peak of the Great Inflation after two oil shocks. |
| Jul 2009 | −2.1% | Gasoline prices had collapsed in the financial crisis; the 12-month change turned negative. |
| Jun 2022 | 9.1% | Post-pandemic peak: the highest inflation rate in more than 40 years. |
| Sep 2026 | 3.7% | Latest reading. |
Monthly values. Explore every month on the US Inflation Rate chart.
Common mistakes
- “Inflation fell, so prices fell.” A drop from 6% to 3% means prices are rising more slowly, not falling. Only a negative reading means prices are lower than a year ago.
- “The CPI is the cost of living.” It measures the price of a fixed basket. Your personal inflation rate depends on what you buy: a renter who drives a lot experiences a different number than a homeowner who works from home.
- Mixing up the index and the rate A CPI of 320 does not mean 320% inflation. The level only matters compared with another month.
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CPI: questions and answers
When is the CPI published?
The BLS releases each month’s CPI about two weeks after the month ends, usually around the middle of the following month, at 8:30 a.m. Eastern time.
What is the difference between CPI-U and CPI-W?
CPI-U covers all urban consumers. CPI-W covers only households of urban wage earners and clerical workers, about 30% of the population, and is the index used for Social Security cost-of-living adjustments.
Why does the Fed not target the CPI?
The Federal Reserve defines its 2% goal with the PCE price index, which covers a broader range of spending and adjusts its weights faster when people switch between products. See PCE price index.