The change last week, though, was a real haircut. The BLS, which monitors some 80,000 items, added one major category, education and communication, catapulting the CPI into the information age. All the latest revisions will shave about .1 of a percentage point off the annual rate, bringing the four-year cumulative effect on the CPI to .6 of a percentage point. The White House predicts that turning a few more knobs will bring that figure to .7. Officials say accuracy, not parsimony, is the goal.
New products enter the market.
Old ones are modified or disappear. The market basket of today is totally different from that of a generation ago. There is a gold lining of sorts. The overstated inflation rate has kept interest rates unduly high because lenders account for inflation in setting rates. Allen Sinai of Primark Decision Economics believes that even with the changes, the CPI may be a full point too high.