About this indicator
About
The headline Consumer Price Index measures the average price American households pay for a basket of goods and services. The Bureau of Labor Statistics releases it once a month, usually on the second Tuesday, covering the prior month. The basket is built from about 80,000 price quotes a month, collected in 75 urban areas, weighted by what consumers actually spend money on according to the Consumer Expenditure Survey. Headline CPI includes food and energy, which makes it more volatile than core but closer to what families actually pay at the register.
Why it matters
Headline CPI anchors Social Security cost-of-living adjustments, military and federal civilian pensions, and the bracket boundaries of the federal income tax code. Treasury Inflation-Protected Securities (TIPS) pay coupons that adjust to it. A 0.1 percentage-point surprise in either direction can move 2-year Treasury yields by 5-15 basis points within minutes of the release, and futures prices on the federal funds rate adjust in parallel.
How it's computed
BLS prices a fixed basket each month and chains the index forward using a modified Laspeyres formula, with a Tornqvist update every two years to handle substitution. The base period is 1982-84 = 100. Two main variants exist: CPI-U for all urban consumers (the headline) and CPI-W for urban wage earners (the COLA base). Owners' equivalent rent — the imputed cost of owning a home — is the largest single component at about 27% of the basket.
Pitfalls
Most people quote the year-over-year headline. The Fed reads the seasonally adjusted month-over-month change instead, because that's what shows up in policy timing. Quality adjustment (hedonic regression) and the OER methodology produce a recurring debate about whether CPI under- or over-states the inflation a real household feels. The Boskin Commission report from 1996 is still the canonical critique.