Inflation is measured by an index of prices paid by urban consumers for a “basket” of items including food, clothing, shelter, fuels, transportation fares, service fees such as utilities, and sale taxes (CPI-U all items). The numerical index value for a base period (e.g., 1982-1984) is set at 100. Index values for the following periods are expressed relative to the base value. For example, if the base value is 200 and the current value is 225, the index value is expressed as: 225 divided by 200 multiplied by 100=112.5.
The CPI-U usually increases from the previous month. Over the past 50 years, the index increased over 90% of the months. In other words, the general price level in the US does not often decline.
The rate of inflation is the percentage change in the CPI-U from one period to another. For example, the CPI-U was 308.02 in November 2023 and 316.44 in November 2024—an inflation rate of 2.73%. The inflation rate is not often negative; the latest period of negative inflation was December 2008-October 2009 during a recession.
Although the general level of prices does not decline often, prices of individual items in the CPI-U such as meat, poultry, eggs and fish are far more variable than prices of most other items that make up the CPI-U. The prices of these products are affected by weather, production cycles, disease, and other factors.
Consumer prices are affected by many factors, most of which cannot be controlled. In 1971, temporary freezes were put in place on prices and wages, causing significant damage to the US economy.