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What Inflation Means to You: Inside the Consumer Price Index

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Posted by Jill Mislinski - Advisor Perspectives

on Tuesday, 16 May 2017 07:18

Note: The charts in this commentary have been updated to include Friday's Consumer Price Index news release.

Back in 2010, the Fed justified its aggressive monetary policy "to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate" (full text). In effect, the Fed has been trying to increase inflation, operating at the macro level. But what does inflation mean at the micro level — specifically to your household?

Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U, which we'll refer to hereafter as the CPI.

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....continue reading HERE

....related:

A Long-Term Look at Inflation


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