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En español | If you grew up during the 1970s or early 1980s, inflation may be something that causes you financial anxiety. You probably remember gas rationing and rising prices for everything from hamburgers to clothing.
The recent increase in the Consumer Price Index for All Urban Consumers (CPI-U), which is the main inflation gauge used by the government, probably scared you a bit too. The prices of hotel rooms, gasoline and even bacon have gone up a lot in the last 12 months.
But what's all the fuss about? What is inflation? What are its causes and solutions? How much should you worry now about inflation? Here's a guide to inflation and some tips on how to deal with it.
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What is inflation?
Simply put, inflation is an increase in prices. The most commonly used inflation index, the CPI-U, measures the average change in prices for a basket of goods that represents consumption by residents of cities and suburbs. According to the Bureau of Labor Statistics, which maintains data for this index, the CPI-U has risen an average of 3.2% a year since 1914.
The index's most recent result was certainly higher than average: the CPI-U rose 4.2% in the 12 months ending in April, the largest 12-month increase since September 2008. The increase in this The one-month index — 0.8% in April — was the largest since 2009.
Your experience with inflation is likely to be different from what the CPI-U reflects, which weights each item based on a formula intended to reflect the average household. If you have kids in college, large medical bills, or a foodie appetite, your cost of living has likely risen more than the consumer price index (CPI). On the other hand, if your children have already moved out of your home and you don't have a lot of medical expenses, your cost of living has probably gone up by less than the CPI.
