Consumer Price Index (CPI)

Each month BLS collects prices for about 80,000 items at thousands of stores, service establishments, rental units and doctors’ offices across urban America. Those prices feed 7,776 basic indexes, one for each combination of item category and geographic area, which are then averaged into the national figures. Each category counts in proportion to how much consumers spend on it, using weights from the Consumer Expenditure Surveys that BLS updates every year.

The basket is organized into eight major groups: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. Housing is by far the largest. In December 2025, shelter made up about 35.6% of the CPI-U, and owners’ equivalent rent, an estimate of what owned homes would rent for, about 26.2% on its own.

The index is set to 100 for the 1982–84 average. The August 2026 CPI-U of 334.980 means the basket cost about 3.35 times its 1982–84 price, and an inflation rate is simply the percentage change in that level between two dates, as the formula below shows.

BLS publishes several versions from the same price data, and each has an official job. The CPI-U covers all urban households, over 90% of the US population, and is the headline number in the news. The CPI-W covers households of wage earners and clerical workers, about 30% of the population, and is the index behind Social Security’s cost-of-living adjustment.

The chained CPI, or C-CPI-U, uses the same population as the CPI-U but lets the weights shift as consumers substitute between categories when relative prices change, such as buying more chicken when beef gets expensive. It tends to rise a little more slowly: BLS puts the average gap in December-to-December changes from 2001 to 2023 at about 0.2 percentage points. Its early figures are preliminary and become final 10–12 months later. Since the 2017 tax law, the chained CPI has indexed federal tax brackets.

Core CPI strips out food and energy, whose prices swing sharply, to show the underlying trend of Inflation. BLS also publishes a research index for Americans 62 and older, the R-CPI-E, but it has no official use, and BLS cautions that its sample is small.

The monthly release reports two headline numbers that answer different questions. The 12-month change compares this month’s index with the same month a year earlier, before seasonal adjustment; for August 2026 it was 3.4% for all items and 2.4% for core. The one-month change is seasonally adjusted to strip out regular patterns such as holiday pricing; in August 2026 it was 0.4%. Monthly figures jump around, so the Federal Reserve says its policymakers generally look at average inflation over periods from a few months to a year or longer.

Component detail shows which categories drove the change: in August 2026, gasoline alone accounted for over a third of the monthly increase. Seasonally adjusted figures can be revised for up to five years, which is why BLS recommends the unadjusted indexes for contracts and escalation clauses.

CPI figures are written into benefit formulas, the tax code, Treasury securities and private contracts, and each use reads a particular version of the index over a particular window. Timing explains why one year’s inflation reaches households over the following year: the Social Security COLA is fixed by third-quarter prices and paid from January, next year’s tax brackets use prices through August, and I bond rates reset every May and November from recent CPI-U readings.

BLS itself says the CPI is not a complete cost-of-living index. It prices a basket of goods and services, but it does not try to capture everything that affects well-being, such as public services, health or environmental quality. It also leaves out rural households outside metropolitan areas.

More practically, it is an average. A household that owns its home outright is barely touched by rising rents, which drive a large share of the index, while a renter feels them fully. Older households tend to spend more on medical care and less on commuting and education. Your own inflation rate depends on your own spending mix, so the best check is to compare what you spent this year with what the same things cost last year. The CPI is still the right tool for converting dollars between years and measuring purchasing power, because it is consistent, public and the standard that contracts and laws rely on. A sustained fall in the index is Deflation.