BPEA | 1980 No. 2

The Consumer Price Index and the Measurement of Recent Inflation

1980, No. 2

THE consumer price index in the United States may be the most closely
watched economic barometer in the world. Yet in recent years, as the
public and the media have paid increasing attention to the monthly
CPI announcements, more and more economists and officials have expressed
dissatisfaction with the way the CPI measures inflation. The construction
of price indexes, once an arcane subject used to torture graduate
students, is now a subject debated in the halls of Congress and discussed
on the nightly television news. In the wake of the stunning recent gyrations
in the CPI inflation rate, this seems an opportune time to reexamine the
index-and especially its treatment of housing, which has been so much
in the public eye of late.