Dear Dr. Don,
So, what is the “true” rate of inflation right now with food and fuel factored in?
— Robert Requests
You’re talking about what’s called “headline inflation,” which measures the rate of change in price for the basket of goods and services that comprises the Consumer Price Index, or CPI. Headline inflation numbers aren’t seasonally adjusted, and they include food and energy costs.
In contrast, “core inflation” is calculated by subtracting out food, energy and other costs that tend to be subject to big swings in prices. It is expected to better represent the underlying true rate of inflation.
There’s also the Producer Price Index, which is reported as headline and core numbers. The Bureau of Labor Statistics keeps track of both indexes in multiple versions.
However, my favorite page on the site is the “CPI Inflation Calculator,” which allows you to figure out the inflation-adjusted price of a dollar amount between two points of time. The calculator will work both ways — you can put your salary today into the calculator and ask what it would be in 1982 dollars. That may help ease some of the pain in rising prices.
What you spend your money on determines inflation’s impact on you. For example, college cost inflation has outpaced the CPI inflation rate, as have health insurance costs.