Inflation is defined as an upward movement in the average level of prices. Each month, the Bureau of Labor Statistics reports on the average level of prices when it releases the Consumer Price Index (CPI).
The CPI is a measure of the change in the prices for a “market basket” of consumer goods and services over a period of time. The CPI is developed from detailed expenditure information provided by families and individuals on what they actually bought in eight major categories: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other groups and services.
Tip: Back in the 80s, what would have cost you $1.00 in 1985 will now cost you $2.35 due to inflation. It’s important to factor in inflation as you consider your financial future. — Source: Bureau of Labor Statistics, 2014