How do you calculate CPI?
Price a fixed basket of goods and services in the current period, divide by the cost of the same basket in the base period, and multiply by 100. CPI = (cost of basket in current year ÷ cost of basket in base year) × 100.
CPI formula: how to calculate CPI and inflation
The consumer price index formula is CPI = (cost of basket now ÷ cost of basket in the base period) × 100. To calculate CPI, price a fixed basket of household purchases, weight each category by its share of the average budget, and express the total as an index where 1982–1984 equals 100. The inflation rate formula is then the percentage change in that index: ((CPI now − CPI earlier) ÷ CPI earlier) × 100.
The formulas
Index level
CPI = (cost of basket now ÷ cost of basket in reference period) × 100Year-over-year inflation
YoY % = (index this month ÷ index same month last year − 1) × 100Month-over-month change
MoM % = (index this month ÷ index last month − 1) × 100Annualized rate over N months
Ann. % = ((index now ÷ index N months ago) ^ (12 ÷ N) − 1) × 100Category contribution to headline
Contribution = category inflation × category weight ÷ 100Worked example with the latest release
The CPI-U index for Sep '26 is 336.9. Twelve months earlier, in Aug '25, it was 324.0.
(336.9 ÷ 324.0 − 1) × 100 = +4.00%Against the prior month (Aug '26, 335.0):
(336.9 ÷ 335.0 − 1) × 100 = +0.59%That is where the headline +4.00% inflation rate for Sep '26 comes from — no adjustment, just the published index levels.
Which categories contribute most right now
inflation × weight ÷ 100 · Sep '26
| Category | Weight | Inflation | Contribution |
|---|---|---|---|
| Housing | 44.9% | +3.47% | 1.56 pp |
| Energy | 6.4% | +20.59% | 1.32 pp |
| Transportation | 16.4% | +8.01% | 1.31 pp |
| Food | 13.6% | +2.82% | 0.38 pp |
| Recreation | 5.4% | +3.15% | 0.17 pp |
Questions about the calculation
What is the formula for inflation rate using CPI?
Inflation rate = ((CPI in current period − CPI in earlier period) ÷ CPI in earlier period) × 100. For annual inflation, compare this month's CPI to the same month a year earlier.
How do you adjust a price or wage for inflation with CPI?
Multiply the old amount by (CPI now ÷ CPI then). To find a real wage, divide the nominal wage by (CPI ÷ 100), which expresses it in base-period dollars.
What is the CPI formula?
CPI for a period equals the cost of the fixed basket in that period divided by its cost in the reference period, multiplied by 100. Inflation is then the percentage change in that index: (current index / earlier index - 1) x 100.
How is year-over-year CPI inflation calculated?
Divide this month's index by the index for the same month one year earlier, subtract 1 and multiply by 100. Using the same calendar month on both sides removes normal seasonal patterns without any statistical adjustment.
How are CPI weights decided?
Weights come from the Consumer Expenditure Survey, which records what households actually spend across categories. Each category's price change is multiplied by its weight, so shelter at roughly 45 percent of the basket moves the headline number far more than apparel at under 3 percent.
How are prices collected?
BLS staff and automated feeds collect roughly 90,000 price quotes a month across about 75 urban areas, from retail outlets, service providers, landlords and homeowners, then aggregate them into item-level indexes before combining them by weight.
What is a quality adjustment?
When a product changes — a bigger screen, a new safety feature, a smaller package — the agency separates the part of the price change caused by the change in the product from genuine price change. Only the genuine part enters the index.
What does annualizing a monthly change mean?
Annualizing asks what the yearly rate would be if the recent pace continued. For a 3-month annualized rate, take the index 3 months ago, compute the ratio to today, raise it to the power of 12/3 and subtract 1.