The Consumer Price Index (CPI) is a measure of the average change in price over time in a fixed market basket of goods and services bought by consumers for day-to-day living. The All Items CPI for the U.S. is the broadest, most comprehensive index, and is often quoted as the source for the “rate of inflation”. The CPI for All Items less Food and Energy (also sometimes referred to as the “core” or ” underlying” CPI) excludes volatile food and energy prices. Some analysts use this index to track long-term trends in prices. This chart shows 12-month percent changes in both the CPI for All Items and the CPI for All Items Less Food and Energy for each month from 1991 to the most recently published month. These changes are calculated from indexes before seasonal adjustment. Unadjusted indexes are more commonly used for annual percent change calculations.
CPI can be greatly influenced in any given month by a movement in volatile food and energy prices. Therefore, it is important to look at CPI excluding food and energy, commonly called the “core rate” of inflation. Within the core rate, some of the more volatile and closely watched components are apparel, tobacco, airfares, and new cars. In addition to tracking the month/month changes in core CPI, the year/year change in core CPI is seen by most economists as the best measure of the underlying inflation rate.