Assessing and improving the accuracy of the CPI

This article gives an overview of the process of estimating the Consumer Price Index (CPI), examining the major procedures and process used to create the index. It examines issues that affect the accuracy of the CPI, including data quality, sampling error, bias, and response rates. It then considers new data collection methods and recent improvements to CPI component indexes. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Americans use the CPI extensively, including to adjust historical data, to escalate federal payments and tax brackets, and to adjust rents and wages. The CPI directly affects lives, so it must be as accurate as possible. For example, the CPI measured the 12-month change in prices from December 2021 to December 2022 as 6.5 percent. How confident can we be in that estimate?