A Primer on Inflation — Why Prices Rise, When to Worry

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If you grew up in the 1970s and early 1980s, inflation may be one of the monsters in your closet of economic anxieties. You probably remember gas rationing and soaring prices for everything

from Hamburger Helper to halter tops.

The economy is in a much better place these days. Despite President Donald Trump’s seesawing tariffs, consumer prices ticked up only 2.3 percent in April from a year earlier, cooler than

March’s 2.4 percent increase, according to the Consumer Price Index (CPI), the government's closely watched gauge of inflation. The CPI measures price changes across commonly purchased goods

and services.

Nevertheless, 63 percent of Americans say inflation is still one of their top concerns, a February Pew Research Center survey found, not entirely surprising in light of a spike in prices in

recent years that saw the inflation rate top 9 percent in the summer of 2022 before gradually coming back to Earth.  

So, what is inflation, what causes it and what cures it? Here's what you need to know.

Put simply, inflation is a rise in prices. Price changes are tracked by the Bureau of Labor Statistics (BLS) and reported monthly. While referred to generically as the CPI the broadest and

most commonly used inflation index — BLS has more than one — is actually the CPI-U, which measures the average price change in a basket of goods likely to be bought by people who live in

cities and suburbs. (The "U" stands for urban.) The CPI-U covers more that 90 percent of the population. 

Your experience of inflation is probably somewhat different from what’s reflected in the CPI, which weights each item according to a formula meant to mirror the average household. If you

bake a lot, for example, you’re feeling a pinch at the moment since egg costs jumped 49.3 percent percent year-over-year in April. The government's price data dates back more than a century.