How the CPI Becomes the Inflation Rate: The 3.7% Worked Out

On October 14, 2026, the Bureau of Labor Statistics (BLS) reported two figures for September’s consumer prices: up 0.6% in a month and up 3.7% over a year. Both come from the Consumer Price Index, or CPI, a monthly measure of what urban households pay for a set basket of goods and services. Neither figure is an estimate of how expensive life feels. Each is a percent change between two index values, and the two headline figures are taken from different versions of the index.

Turning two index values into 3.7%

An index value is not a price. For most CPI-U and CPI-W series, the average for 1982–84 is set to 100. A reading of 107.000 would mean that a basket costing $100 in that base period now costs $107. The level on its own only says how far prices have moved since the early 1980s. The inflation rate comes from comparing two levels.

BLS sets out the calculation in three steps in its fact sheet on percent changes. Here they are with the not-seasonally-adjusted CPI-U for all items, from Table 1 of the September 2026 release:

1. Subtract the earlier value from the later one: 336.940 − 324.800 = 12.140. This is a change in index points, not yet a percentage.
2. Divide by the earlier value: 12.140 ÷ 324.800 = 0.03738. The starting level is the base, so it goes underneath.
3. Multiply by 100: 3.738, which rounds to 3.7%, the figure BLS published.

The fact sheet runs the same steps on December 2021 (278.802) and December 2022 (296.797) and arrives at 6.5%. Dividing by the later value instead would produce a smaller number that does not match the official rate. If you repeat the exercise for other dates, take both values from the same index and the same unadjusted series.

Why the monthly figure follows a different route

Run the same steps on August and September 2026 and the result is about 0.59%: (336.940 − 334.980) ÷ 334.980 × 100. BLS’s headline monthly change of 0.6% comes from seasonally adjusted data instead. Seasonal adjustment is a statistical correction for price swings that recur at the same time each year. BLS derives its seasonal factors with a program called X-13ARIMA-SEATS.

The two results happen to round alike this month, but they are different series and need not agree in other months. The release tables publish seasonally adjusted percent changes, not seasonally adjusted index levels, so the 0.6% cannot be rebuilt from the release alone. The adjusted monthly changes for 2026 ran 0.1% (June to July), 0.4% (July to August) and 0.6% (August to September).

The 12-month figure, by contrast, is the unadjusted one. The spans differ too: 0.6% describes one month, and 3.7% describes twelve.

Where the index values come from

The index levels rest on a large price survey. BLS records prices for about 80,000 items each month, sorted into more than 200 spending categories and eight major groups. The Handbook of Methods divides urban areas into 32 index areas and spending into 211 item strata, which become 243 basic items for calculation. That produces 7,776 item-area combinations (32 × 243), each with its own price index.

Those pieces are combined using weights from the Consumer Expenditure Survey. The expenditure reference period is updated each January with 12 months of survey data. The formula is a modified Laspeyres index, which prices a fixed set of quantities over time. For the CPI-U and CPI-W, those quantity weights remain fixed for one year.

Shelter is a third of the basket; energy moved most

BLS reports each category’s weight as its relative importance, the share of the basket’s total cost.

Weights are relative importance as of August 2026; changes are not seasonally adjusted, September 2025 to September 2026 (BLS Table 2). Rows overlap: core, for example, includes shelter and the transportation lines.

Shelter, at 35.323, is about a third of the CPI-U. Energy carries a far smaller weight, 7.418, yet its prices rose 20.4% over the year, and motor fuel rose 34.9%. BLS publishes no single “transportation” or “medical care” line in this table, so those areas appear as their services and commodities parts. The relative importance values also move from month to month as relative prices change.

Headline, core and CPI-W use the same arithmetic

The headline rate covers all items. BLS also publishes all items less food and energy, which some users treat as a gauge of “core” or “underlying” inflation. Its weight follows from the table: food (13.507) plus energy (7.418) is 20.925, leaving 79.075. In September 2026, core rose 2.6% over the year and 0.3% on the month, seasonally adjusted, against 3.7% and 0.6% for all items. Food rose 2.5%, below the core rate, so the gap traces mainly to energy.

The CPI-W is a second index built the same way for a narrower group. The CPI-U represents “over 90 percent of the U.S. population.” The CPI-W covers urban wage earners and clerical workers, about 30% of the population, who are a subset of the CPI-U group. In September 2026 it rose 3.9% over 12 months to 330.654, compared with 3.7% for the CPI-U.

The CPI-W matters for Social Security recipients because the Social Security Administration uses it for cost-of-living adjustments, or COLAs. The COLA is the percent increase from the previous peak third-quarter average of the CPI-W to the current third-quarter average. That is the same percent-change formula, applied to quarterly averages instead of single months. BLS computes the index but does not set policy on how other agencies use it.

What one CPI rate leaves out

The CPI tracks the price of an average basket, not any one household’s costs. A household that spends a larger share on motor fuel than the 3.976 weight, for example, will have had a different year from the one the 3.7% headline describes. The same applies in reverse to heavy spenders on medical care commodities, whose prices fell 3.3%.

Other countries apply the same percent-change arithmetic to their own indexes, so their rates are not directly comparable with the U.S. figure. In the UK, the Office for National Statistics reports two measures. For September 2026, CPI rose 3.5% and CPIH 3.6% over 12 months. CPIH adds owner occupiers’ housing costs and Council Tax, which CPI leaves out, and the U.S. shelter component is built differently from both. Canada’s rate comes from Statistics Canada’s own CPI, with its own basket and weights.