The Consumer Price Index (CPI)

Inflation is an increase in the price of goods or services. The CPI, is “sort of the headline measure of inflation in the U.S. economy” said Erica Groshen a visiting scholar at Cornell University and former commissioner of the Bureau of Labor Statistics, the organization that calculates the CPI.

The Bureau of Labor Statistics (BLS) collects prices of goods and services that the average American consumer buys. “We have about 400 people across the country who collect about 80,000 prices per month of pretty much anything that your household may purchase,” said Stephen Reed, an economist currently at the Bureau of Labor Statistics who works on the CPI.

That market basket of goods and services includes a wide range of items such as food, televisions, prescription drugs, rent, gasoline and college tuition. “When people use the CPI, what they’re often using is the change in that index, which could be defined as inflation” said Reed.