In the broadest sense, the CPI and unemployment rates are often inversely related. The Federal Reserve often attempts to decrease one metric while balancing the other. For example, in response to the COVID-19 pandemic, the Federal Reserve took unprecedented supervisory and regulatory actions to stimulate the economy.<\/span><\/p> As a result, the labor market strengthened and returned to pre-pandemic rates by March 2022; however, the stimulus resulted in the highest CPI calculations in decades. When the Federal Reserve attempts to lower the CPI, it runs the risk of unintentionally increasing unemployment rates.<\/span><\/p>"
}
}
,
{
"@type": "Question",
"name": "How Is the Consumer Price Index Used?",
"acceptedAnswer": {
"@type": "Answer",
"text": " The CPI Index is an inflation indicator closely watched by policymakers and financial markets. A related CPI measure is used to calculate cost-of-living adjustments for federal benefit payments.<\/p>"
}
}
,
{
"@type": "Question",
"name": "What Are Some Criticisms of the CPI?",
"acceptedAnswer": {
"@type": "Answer",
"text": " The CPI-U calculation only measures inflation for urban populations and remains a less-than-reliable source of data for individuals living in rural areas. The CPI does not explicitly state how different demographics may be impacted by inflation.<\/p> For example, soaring education costs may adversely impact younger individuals, while the impact of increasing elderly care costs is felt by a different group of individuals. Lower-income individuals who contribute more gross income towards necessities of shelter and food will skew differently than households with larger disposable income. For this reason, the CPI may not adequately reflect each individual's experience about costs and changes over time.<\/p>"
}
}
]
} ] }
]