What Inflation Means to You: Inside the Consumer Price Index
Doug Short submits:
(The charts in this commentary have been updated to include the June Consumer Price Index news release, for the May data.)
The Fed justified the current round of quantitative easing "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 is trying to increase inflation, operating at the macro level. But what does an increase in 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 I'll refer to hereafter as the CPI.
The slices are listed inComplete Story »