Inflation index reading angers saver
Dear Dr. Don,
I have owned Series I savings bonds since 2000, and some have a fixed rate of 3.6 percent. From your column on Bankrate, I understand I'll be earning zero percent for the next six months, even on the bonds with the high fixed rate.
I question the -5.56 percent inflation rate. Do the people that determine this rate live in the real world? I only wish that milk, bread and other essentials were going down almost 6 percent. Someone should give those statistics experts a wake-up call.
-- Annoyed Andrew
I understand your frustration with the inflation index. The inflation component in the yield of a Series I savings bond is based on changes in the Consumer Price Index for All Urban Consumers.
While that may not correlate well with the inflation you're experiencing, the statisticians compiling the index do live in the real world, and they don't need a wake-up call.
The Bureau of Labor Statistics publication, "The Consumer Price Index -- Why the Published Averages Don't Always Match An Individual's Inflation Experience," provides a nice overview of the topic. It won't make you feel any better about earning zero percent interest over the next six months on your Series I savings bonds -- see my reply to Tom in yesterday's column for the interest rate cycles -- but it should help reduce your frustration with government statisticians.
Read more Dr. Don columns for additional personal finance advice.