What
is the Difference Between Inflation and CPI?
Because CPI
represents a number that is the most widely used measure of inflation,
most people think that CPI and inflation are one in the same. But
CPI itself does not tell us what the current inflation rate is.
Calculations using the index must be done in order to determine
the increase or decrease in the prices of goods and services.
Calculate
the Inflation Rate
The Bureau of Labor Statistics (BLS) evaluates prices and generates
the current CPI on a monthly basis. It then compares the current
figure to last year’s index. The resulting percentage change
between the two figures indicates the increase or decrease in inflation.
For
example:
If current CPI is 189 and one year ago CPI was 185, the percentage
increase is 2.16% calculated as follows:
(189-185)/185
= 2.16%
Using this example,
the inflation rate for that particular one-year period of time was
2.16%.
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