Inflation is measured by tracking the price of a fixed basket of goods and services over time and expressing the change as an index. In the United States the headline measure is the consumer price index, or CPI, published monthly by the Bureau of Labor Statistics. The CPI tracks the average change in the prices paid by urban consumers for a representative set of goods and services, from groceries and rent to haircuts and airfares. When the index rises 3.7 percent over a year, as it did in the 12 months to September 2026, that is the inflation rate you hear quoted.

The basket is the whole idea

The CPI starts with a basket. The Bureau of Labor Statistics decides what a typical urban household buys and in what proportions, using its Consumer Expenditure Survey, and then prices that same basket month after month. Housing carries the largest weight, followed by transportation and food, because that is roughly how households actually spend. The weighting matters as much as the prices: a 10 percent jump in the price of eggs moves the index far less than a 10 percent jump in rent, because rent is a much larger share of the basket.

Each month, BLS field staff and automated feeds collect tens of thousands of prices for specific items in specific places, from supermarkets and gas stations to doctors' offices and rental units, then combine them in two stages. The Bureau first builds basic indexes for particular item-and-area combinations, then combines those into the higher-level indexes and the all-items number that makes headlines. Because the index is a proxy for the overall price level rather than a dollar amount, the Bureau cautions that you should not compare the raw index value of one series directly against another.

Headline, core and the series you rarely hear named

The number reported as "inflation" is usually the CPI for All Urban Consumers, the CPI-U, over the prior 12 months. For September 2026 that was 3.7 percent, per the BLS release of October 14, 2026. There is also a CPI-W, which covers urban wage earners and clerical workers and is used to set Social Security cost-of-living adjustments; it rose 3.9 percent over the same period.

The figure economists watch most is core inflation, which strips out food and energy. That is not because food and energy do not matter, they plainly do, but because their prices swing sharply month to month for reasons that have little to do with the broad trend. Core inflation gives a cleaner read on where prices are heading underneath the noise. The Federal Reserve, for its own target, prefers a different gauge entirely, the core personal consumption expenditures price index, or core PCE.

Why your inflation is not the CPI

The CPI is an average, and almost nobody is average. The index assumes the basket of a typical urban household. If you rent in a city where rents jumped, drive long distances, or have a child in college, your personal inflation rate can run well above the headline. If you own your home with a fixed-rate mortgage and spend little on the categories that rose fastest, yours can run below it. The CPI is an honest measure of a representative basket, not a measurement of your life.

There are known debates about the method, too. Critics argue the index can understate or overstate true cost-of-living changes depending on how it handles quality improvements and the way shoppers substitute cheaper goods when prices rise. BLS uses specific techniques to address substitution and quality, and publishes the methodology in full in Chapter 17 of its Handbook of Methods. The point for a reader is not that the CPI is wrong, but that it is a defined, documented average with known limits.

A measurement that is itself under strain

The CPI depends on actually collecting prices, and in the summer of 2025 the Bureau reduced the scale of its data collection across the country and suspended collection entirely in a handful of cities, including Lincoln, Nebraska; Provo, Utah; and Buffalo, New York. Less collection means more of the index is estimated rather than directly measured, which is a quiet reason to treat any single month's reading with a little caution and to watch the trend over several months instead.

How to use the number

Treat the headline CPI as a thermometer for the broad economy, not as a personal budget tool. For the direction of policy, watch core inflation and the trend, since the Federal Reserve responds to persistent pressure rather than one hot or cool month. For your own planning, build your own rough basket: weight the categories by what you actually spend, and you will get a truer sense of your cost of living than the national average provides. For the wider picture of what inflation is and what drives it, see our explainer on what inflation is, and for the latest reading, our report on the September 2026 CPI at 3.7 percent.

What to watch

Watch the gap between headline and core, because a wide gap usually means food or energy is doing the moving and may reverse. Watch the shelter component, since it is the largest weight and the slowest to turn. And watch the monthly pace, not just the 12-month figure, because the annual number carries old months forward and can lag a genuine change in direction by the better part of a year.