The cost of living always attracts controversy, even before the current surge in prices.

Many people believe that the true rate of inflation is consistently far higher than the official stats suggest. But is there any evidence to back up these claims?

We discuss the nuances of how inflation is calculated and whether the changes made in the 1980s and 1990s have lowered official inflation numbers, as claimed by websites such as ShadowStats. And what impact does it have on investors?

And in today’s Dumb Question of the Week: Why does the Fed look at Core PCE inflation rather than CPI? Doesn’t it care about food and energy prices?

Selected links

• Misconceptions about the CPI (Bureau of Labor Statistics)
• Public comment of inflation measurement (ShadowStats)
• What ShadowStats gets right and what it gets wrong (Ed Dolan)

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