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IPFS News Link • Federal Reserve

Why Inflation Is at a 12-year High

•, Peter Jacobsen

Yesterday, the Bureau of Labor Statistics (BLS) released numbers indicating that the average price level of consumer goods has risen 4.2% since this time last year. This is the highest rate since 2008. In other words, the average consumer making the same salary this year has taken a pay cut when you consider what their paycheck can actually buy.

How does the BLS know this? One way the BLS keeps track of inflation is by using the consumer price index (CPI). The CPI uses some of the common goods urban consumers buy, and they keep track of the prices of these goods each year.

A CPI growth of 4.2% means this "basket" of goods the average urban consumer buys has gotten 4.2% more expensive. Economists call this measure inflation.