What Is CPI, and How Does It Actually Get Calculated?
The Consumer Price Index (CPI) measures the average change over time in prices paid by consumers for a fixed basket of goods and services, including food, housing, transportation, and medical care. It is calculated and published monthly by the US Bureau of Labor Statistics, based on price surveys collected from thousands of retail outlets and service providers nationwide.
What's actually in the 'basket'
The CPI basket includes weighted categories such as housing (the largest single component), food and beverages, transportation, medical care, recreation, education, and other goods and services, with weights periodically updated to reflect changing consumer spending patterns.
CPI-U vs. other inflation measures
CPI-U (Consumer Price Index for All Urban Consumers) is the most commonly cited headline figure and the one used throughout this site's calculations, but it is not the only inflation measure — the Fed's preferred gauge, PCE (Personal Consumption Expenditures), uses a different methodology and often produces a somewhat different figure.
Why the specific index used matters for return calculations
Because different inflation indices can diverge, especially over shorter periods, any 'real return' calculation should specify which index was used. The Crypto Reality Check uses CPI-U consistently across all of its calculations for this reason.
Frequently asked questions
Is CPI the same everywhere in the US?
The headline national CPI-U is a national average; the Bureau of Labor Statistics also publishes regional CPI figures that can differ from the national number.
Does CPI account for quality improvements in products?
The BLS methodology includes adjustments intended to account for quality changes over time, a technical process that is itself a subject of ongoing economic debate.