What is the current Consumer Price Index (CPI) rate?

As of February 2026, the Consumer Price Index for All Urban Consumers (CPI-U) increased by 3.1% over the last 12 months. This figure represents the overall inflation rate for a broad market basket of goods and services.

How does the CPI affect my Social Security benefits?

Social Security benefits are adjusted annually based on the Cost-of-Living Adjustment (COLA), which is determined by the CPI for Urban Wage Earners and Clerical Workers (CPI-W). If the CPI-W increases, your Social Security payments will typically rise to help maintain your purchasing power.

Is a high CPI good or bad for the economy?

A high CPI, indicating significant inflation, is generally considered bad for the economy as it erodes purchasing power, creates economic uncertainty, and can lead to higher interest rates. However, a very low or negative CPI (deflation) can also be problematic, signaling weak demand and economic stagnation. A moderate, stable inflation rate (around 2%) is typically considered healthy.

What is the difference between CPI and inflation?

The CPI is the primary *measure* of inflation. Inflation refers to the general increase in prices and fall in the purchasing value of money. The CPI calculates this increase by tracking the prices of a basket of goods and services over time.

How can I protect my savings from inflation?

To protect your savings from inflation, consider investing in assets that historically outpace rising prices, such as Treasury Inflation-Protected Securities (TIPS), real estate, stocks, or commodities. Keeping large amounts of cash in low-interest savings accounts during high inflation can lead to a loss of purchasing power.

Why does the Federal Reserve prefer the PCE over CPI?

The Federal Reserve prefers the Personal Consumption Expenditures (PCE) price index because it accounts for consumer substitution (when people switch to cheaper alternatives if prices rise) and has a broader coverage of goods and services. This makes the PCE a more comprehensive and flexible measure of underlying inflation trends for monetary policy decisions.

Does the CPI include taxes?

The CPI measures the prices consumers pay for goods and services, which includes sales taxes and excise taxes directly levied on those purchases. However, it does not include income taxes or property taxes, as these are not directly tied to the price of consumer goods and services in the same way.

Consumer Price Index (CPI) Explained | One Percent Finance