What is the Consumer Price Index (CPI)?

The CPI answers one question: how much more, or less, does the same basket of things cost than it did before? BLS data collectors record the prices of about 80,000 items each month, in thousands of stores, service businesses, rental units and doctors’ offices. Each price is compared with the price of the same item in the previous period, and the changes are averaged using weights that reflect how much consumers spend on each category.

The result is an index number, not a dollar amount. For most CPI series the reference base is 1982–84 = 100, meaning the average of those three years is set to 100. In September 2026 the all-items index stood at 336.940: the basket cost about 3.37 times what it did in the base period, an increase of 236.9%. The level says little by itself; what people call inflation is the percentage change in the index between two dates.

Consumer Price Index (CPI)
A measure, published monthly by the US Bureau of Labor Statistics, of the average change over time in the prices consumers pay for a basket of goods and services. Its percentage change is the most quoted measure of consumer inflation.
Market basket
The set of goods and services whose prices the CPI tracks, from food and rent to cars and medical care. Each category is weighted by its share of consumer spending.

Who publishes the CPI, and when is it released?

The CPI comes from the Bureau of Labor Statistics, part of the US Department of Labor. It is published once a month, at 8:30 a.m. Eastern time, usually around the middle of the month after the one it measures: the October 2026 report came out on November 10, 2026, and the November report is scheduled for December 10. New York and Riyadh times for this and other releases are in the economic calendar guide.

There are several versions. The one in the headlines is the CPI-U, for all urban consumers, a group that makes up over 90% of the US population. The CPI-W covers urban wage earners and clerical workers, about 30% of the population, and is the index behind the yearly cost-of-living adjustment to Social Security benefits. A third, the chained CPI (C-CPI-U), allows for consumers switching between categories when relative prices change.

Because benefits, tax brackets and many contracts are tied to it, the CPI is more than a market indicator. The BLS notes that it is used to adjust Social Security payments for over 67 million beneficiaries and to adjust the federal income tax structure, so that inflation alone does not push people into higher tax rates.

CPI-U
The Consumer Price Index for All Urban Consumers, the headline version of the CPI. It reflects the spending of a group that makes up over 90% of the US population.
CPI-W
The Consumer Price Index for Urban Wage Earners and Clerical Workers, a subset covering about 30% of the US population. It is used to calculate the yearly cost-of-living adjustment to Social Security benefits.

What is in the CPI basket?

The BLS sorts what consumers buy into more than 200 categories, arranged in eight major groups. Each has a weight, called its relative importance, that comes from surveys of what households actually spend. The drawing at the top of the page shows the weights for December 2025: housing 44.5%, transportation 16.3%, food and beverages 14.5%, medical care 8.4%, education and communication 5.8%, recreation 5.1%, other goods and services 2.9% and apparel 2.4%.

Housing dominates because of shelter, which alone is 35.6% of the basket. Most of that is not rent that anyone pays: it is owners’ equivalent rent, 26.2% of the basket, an estimate of what homeowners would pay to rent their own homes. The CPI treats buying a house as an investment, not as consumption, so house prices are not in the index; the cost of living in the home is.

Sales and excise taxes are included, because they are part of the price paid. Income taxes and Social Security taxes are not, and neither are investment items such as stocks, bonds, real estate and life insurance.

Relative importance
The weight of a category in the CPI: its share of the total basket, based on consumer spending. In December 2025 housing had a relative importance of 44.5% and apparel 2.4%.
Owners’ equivalent rent (OER)
The CPI’s measure of housing costs for homeowners: the rent they would have to pay if they rented their own home, without furnishings or utilities. It was 26.2% of the CPI basket in December 2025.

How is CPI inflation calculated? Month over month vs year over year

Every inflation rate is the same piece of arithmetic: divide the new index by the old one and subtract 1. What changes is which two dates you compare. The drawing below uses BLS index levels for September 2026.

Month over month compares the index with the previous month, using seasonally adjusted figures so that patterns that repeat every year do not distort the change. The all-items index rose from 334.131 in August 2026 to 336.298 in September: 336.298 ÷ 334.131 − 1 = 0.6%. Year over year compares the index with the same month a year earlier, using unadjusted figures: from 324.800 in September 2025 to 336.940 in September 2026, or 336.940 ÷ 324.800 − 1 = 3.7%.

The two answer different questions. The monthly number is the newest information, but it is noisy: a month like that one, 0.65% before rounding, would compound to about 8.1% if it were repeated for a year, which is why nobody treats a single month as the trend. The yearly number is steadier and slower. A missing month shows how much the arithmetic depends on the data: the BLS could not collect prices in October 2025 during a lapse in government funding, so its October 2026 report gave a monthly change, 0.4%, but no 12-month change.

Reference base
The period whose average price level is set to 100 in an index. For most CPI series it is 1982–84, so an index of 336.940 means prices are 236.9% above the average of those years.
Seasonal adjustment
A statistical correction that removes price movements that recur at the same time every year. Monthly CPI changes are usually quoted seasonally adjusted, and 12-month changes unadjusted.

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Three cards built from BLS all-items CPI-U index levels. Since the base period, 1982–84 = 100: 1982–84 average 100, September 2026 336.940, change +236.9%, with 336.940 ÷ 100 − 1. Month over month, seasonally adjusted: August 2026 334.131, September 2026 336.298, change +0.6%. Year over year, not seasonally adjusted: September 2025 324.800, September 2026 336.940, change +3.7%. A note reads percent change = new index ÷ old index − 1.

Headline CPI vs core CPI: what is the difference?

Headline CPI is the all-items index. Core CPI is the same index without food and energy, which together are about a fifth of the basket: 13.7% for food and 6.4% for energy in December 2025, leaving 79.9% in the core. Food and energy prices swing with weather, harvests and oil markets, so the core is watched as a steadier guide to the underlying trend.

September 2026 shows how far apart the two can be. Over 12 months, headline CPI rose 3.7% while core CPI rose 2.6% (339.287 ÷ 330.804 − 1). In that single month the headline rose 0.6% and the core 0.3%, after the energy index jumped 5.2%. When the headline runs above the core, food and energy are rising faster than everything else; when it runs below, they are rising more slowly or falling.

Neither number is the “true” one. Households pay for food and fuel, so the headline is what they feel; policymakers look at the core, and at subcategories inside it, to judge whether a move is likely to last. Inflation and the stock market explains which of them markets react to on release day.

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On top, a bar splitting the CPI basket: core, all items less food and energy, 79.9%; food 13.7%; energy 6.4%. Below, two cards for September 2026. 12 months to September 2026: headline (all items) +3.7%, core +2.6%. One month, September 2026: headline +0.6%, core +0.3%. A note reads headline above core means food and energy rose faster than the rest.

CPI vs PCE: which inflation measure does the Fed use?

The Federal Reserve’s 2% inflation goal is defined with a different index: the price index for personal consumption expenditures (PCE), published by the Bureau of Economic Analysis (BEA). The Fed says it uses the PCE index largely because it covers a wide range of household spending, and that it closely tracks other measures too, the CPI included.

The BEA groups the differences between the two into four kinds. Formula: the PCE index uses a Fisher-Ideal formula and the CPI a modified Laspeyres formula. Weights: the relative importance of items differs, and in the BEA’s worked example housing accounts for most of that effect. Scope: the CPI measures what households pay out of pocket, while PCE covers spending by and on behalf of households, including by nonprofit institutions that serve them. And a remainder of other effects, such as seasonal adjustment.

In practice the two tell a similar story with slightly different numbers. For the 12 months to September 2026, the CPI rose 3.7% and the PCE price index 3.6%. The CPI arrives first: for October 2026 it was published on November 10, while the PCE figures were scheduled for November 25. That head start is one reason markets react so strongly to the CPI even though the Fed’s goal uses the PCE.

PCE price index
The price index for personal consumption expenditures, published monthly by the US Bureau of Economic Analysis. It covers spending by and on behalf of households, and the Federal Reserve’s 2% inflation goal is defined with it.

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Two cards. CPI: published by the Bureau of Labor Statistics (BLS); covers what urban households pay out of pocket; formula modified Laspeyres; 12 months to September 2026 +3.7%. PCE price index, in green: published by the Bureau of Economic Analysis (BEA); covers spending by and on behalf of households; formula Fisher-Ideal; 12 months to September 2026 +3.6%. A note reads the Fed’s 2% inflation goal is defined with the PCE price index.

Why do traders watch the CPI release?

Because it changes what markets expect from the Federal Reserve. Inflation above the Fed’s goal argues for higher interest rates, or for keeping them high for longer; inflation falling toward the goal argues for the opposite. Since the policy rate feeds into bond yields and stock valuations, a CPI report that differs from the forecast can move all three within minutes.

What does the CPI not capture?

The CPI is an average for a large population, and the BLS is explicit about its limits. It describes the index as a conditional cost-of-living measure, not a complete one.

  • Your own inflation: the CPI is a national average of millions of price experiences. If you spend more than average on items whose prices are rising fast, your personal rate can exceed it.
  • Everyone in the country: the CPI-U does not cover people in rural nonmetropolitan areas, farm households, military installations or institutions.
  • House prices, stocks and other assets: investment items are outside the basket, and homeowners’ housing costs enter through owners’ equivalent rent.
  • Income taxes and Social Security taxes, which are not prices of goods or services.
  • Price levels between places: the index shows how fast prices change in an area, not whether one city is more expensive than another.
  • Perfect precision: it is built from samples, so it carries sampling error, and consumers’ switching between categories is captured only by the separate chained CPI, whose final figures arrive 10 to 12 months later.