News about CPI

Social Security benefits will rise 3.6% starting January 2027, based on the CPI-W index, which tracks prices for working households rather than retirees. The article argues this misses retirees' spending patterns: they spend less on food, housing and transportation but more on healthcare. Using the CPI-E index for people aged 62 and older, the 2024 raise would have been 4% instead of 3.2%, a $62 monthly increase instead of $50. The Senior Citizens League estimates beneficiaries have lost 13.7% of their buying power since 2016, and the shortfalls compound over time. Because Congress is unlikely to act quickly, retirees can offset the gap by generating more investment income or using higher-yielding savings accounts.

When news reports inflation at 3%, it usually means the Consumer Price Index rose 3% over twelve months, a figure that drives Social Security raises, tax brackets and Federal Reserve decisions. The Bureau of Labor Statistics tracks a fixed basket of goods and services, with housing roughly a third of the index, and for homeowners it uses an estimate of what owners would pay in rent rather than house prices or mortgages, so housing lags market rents by many months. The PCE index, which defines the Fed's 2% target, usually runs a few tenths of a point below CPI because it covers broader spending. Individual price experience differs because people's baskets vary, frequent purchases like gas and groceries stand out, and prices that rose do not fall back when inflation slows. BLS quality adjustments, such as a faster laptop at the same price, are also invisible to shoppers.