Why Everything Is Getting More Expensive
Inflation may be “back to normal” on paper while your grocery bill still feels brutal. Here’s what inflation really measures—and what it means for your paycheck.
By TheMurrow Editorial
February 1, 2026
Key Points
- 1Separate the rate from the level: inflation measures how fast prices rise, not whether today’s prices are already painfully high.
- 2Compare CPI and PCE: both are “official,” but they differ on scope, substitution, and who pays—especially for healthcare.
- 3Track headline and core together: headline reflects checkout reality, while core helps reveal the underlying trend policymakers watch.
The strange thing about inflation in 2026 is that many Americans are being told it’s “back to normal” while their grocery bill still feels like a monthly ambush.
That tension isn’t just psychological. It’s built into how inflation works: inflation measures the pace of price increases, not whether prices are high. When the pace slows, the pain often remains.
So when headlines say inflation cooled to the mid‑2% range at the end of 2025, that can be true—and still leave households wondering what planet the numbers describe. The key is understanding what “inflation” is, what it isn’t, and why the U.S. publishes more than one “official” measure.
Inflation isn’t ‘prices are high.’ Inflation is ‘prices are rising.’ High prices can linger long after inflation fades.
— — TheMurrow Editorial
Inflation: the word we use for a very specific problem
Inflation has a clean definition with messy consequences: a sustained rise in the general price level, which means each dollar buys less over time. A one‑month spike in airfare isn’t inflation. A one‑time jump in used cars isn’t inflation either. Inflation is the broad, ongoing upward drift across many categories that changes how far paychecks go.
Confusion starts when people use “inflation” as shorthand for the fact that things are expensive. Expensive can be permanent. Inflation—technically—is about direction and speed.
Confusion starts when people use “inflation” as shorthand for the fact that things are expensive. Expensive can be permanent. Inflation—technically—is about direction and speed.
“Prices are still high” is not the same as “inflation is still high”
When inflation slows, prices usually keep rising—just more slowly. Economists call that disinflation. It’s not a trick; it’s the math.
- Disinflation: prices rise, but at a slower rate than before.
- Deflation: overall prices fall.
- “Prices going back to normal”: what many people mean emotionally, but what the economy rarely delivers without deflation.
Deflation sounds appealing at the checkout counter, yet it often travels with layoffs and recession risk. Modern central banks treat deflation like a fire alarm, not a victory lap.
- Disinflation: prices rise, but at a slower rate than before.
- Deflation: overall prices fall.
- “Prices going back to normal”: what many people mean emotionally, but what the economy rarely delivers without deflation.
Deflation sounds appealing at the checkout counter, yet it often travels with layoffs and recession risk. Modern central banks treat deflation like a fire alarm, not a victory lap.
Why inflation feels personal even when it’s “average”
Inflation statistics describe an “average basket” of goods and services. Households don’t live in an average. Parents with teenagers experience groceries differently from retirees with paid‑off mortgages. Renters feel shelter costs in their bones in a way homeowners may not.
People also notice the most salient purchases—groceries, gasoline, rent—more than categories where prices can fall or improve quietly, such as electronics. That doesn’t imply the data is rigged. It means daily life is not a weighted index.
People also notice the most salient purchases—groceries, gasoline, rent—more than categories where prices can fall or improve quietly, such as electronics. That doesn’t imply the data is rigged. It means daily life is not a weighted index.
Most families don’t experience ‘the basket.’ They experience rent due dates, gas gauges, and the price of eggs.
— — TheMurrow Editorial
Where the “official” inflation numbers come from—and why there’s more than one
The U.S. publishes multiple inflation measures because different institutions need different tools. A pension adjustment needs one kind of gauge. A central bank steering the economy needs another.
Two names dominate: CPI and PCE. Both are “official.” Both are rooted in extensive data collection. They differ in scope and methodology in ways that can move the headline number.
Two names dominate: CPI and PCE. Both are “official.” Both are rooted in extensive data collection. They differ in scope and methodology in ways that can move the headline number.
CPI: the public-facing workhorse
The Consumer Price Index (CPI) is produced by the U.S. Bureau of Labor Statistics (BLS). It tracks prices for a basket of goods and services purchased by urban consumers. CPI is widely cited in headlines and is often used for cost‑of‑living adjustments.
CPI has a reputation—sometimes unfairly—as a rigid “fixed basket.” In reality, BLS has incorporated limited substitution within categories since January 1999, using geometric means to better reflect how consumers shift between similar items when relative prices change, according to the BLS CPI questions-and-answers material (BLS).
BLS also publishes a more substitution-friendly variant called C‑CPI‑U (the “chained CPI”), which allows more substitution across categories. The tradeoff: the chained measure is revised later because it depends on more complete spending data, with final data available roughly 10–12 months after (BLS).
CPI has a reputation—sometimes unfairly—as a rigid “fixed basket.” In reality, BLS has incorporated limited substitution within categories since January 1999, using geometric means to better reflect how consumers shift between similar items when relative prices change, according to the BLS CPI questions-and-answers material (BLS).
BLS also publishes a more substitution-friendly variant called C‑CPI‑U (the “chained CPI”), which allows more substitution across categories. The tradeoff: the chained measure is revised later because it depends on more complete spending data, with final data available roughly 10–12 months after (BLS).
PCE: the Fed’s preferred lens
The Personal Consumption Expenditures (PCE) Price Index is produced by the Bureau of Economic Analysis (BEA). It matters because the Federal Reserve’s inflation goal is framed around PCE inflation, with a 2% longer‑run objective.
Why the Fed prefers it, as widely explained in policy coverage and analysis, comes down to three practical features:
- Broader scope: PCE includes some spending done on behalf of households, such as employer-paid healthcare.
- More substitution: PCE uses a chained approach that tends to make it look slightly lower and smoother than CPI in many periods.
- Policy fit: the Fed wants a measure that reflects evolving consumption patterns as people respond to changing prices (Kiplinger summary of Fed preference).
That difference is why a reader can see “inflation” quoted at one rate on the evening news (often CPI) and another in Fed coverage (often PCE) without anyone lying.
Why the Fed prefers it, as widely explained in policy coverage and analysis, comes down to three practical features:
- Broader scope: PCE includes some spending done on behalf of households, such as employer-paid healthcare.
- More substitution: PCE uses a chained approach that tends to make it look slightly lower and smoother than CPI in many periods.
- Policy fit: the Fed wants a measure that reflects evolving consumption patterns as people respond to changing prices (Kiplinger summary of Fed preference).
That difference is why a reader can see “inflation” quoted at one rate on the evening news (often CPI) and another in Fed coverage (often PCE) without anyone lying.
Two inflation numbers can both be ‘official’ and still disagree—because they answer different questions.
— — TheMurrow Editorial
CPI vs. PCE: what the difference means at your kitchen table
The CPI-PCE debate can sound like inside baseball. It isn’t. The choice of index affects how the economy is described—and, indirectly, how policy decisions ripple into mortgages, job markets, and wages.
CPI tries to reflect what urban consumers pay out of pocket. PCE tries to reflect what households consume, including items paid by others on their behalf. That one distinction—who pays—matters a great deal in healthcare-heavy America.
CPI tries to reflect what urban consumers pay out of pocket. PCE tries to reflect what households consume, including items paid by others on their behalf. That one distinction—who pays—matters a great deal in healthcare-heavy America.
A practical example: healthcare and “who pays” changes the story
Suppose your employer covers most of your insurance premium. You still “consume” healthcare coverage, but you don’t feel the monthly premium in the same way as rent.
- CPI leans toward what households directly purchase.
- PCE captures spending on behalf of households, so healthcare has a different role.
Readers sometimes interpret PCE running lower than CPI as policymakers minimizing the problem. Another interpretation is more mundane: PCE is built to represent consumption comprehensively, not just a household’s receipts.
- CPI leans toward what households directly purchase.
- PCE captures spending on behalf of households, so healthcare has a different role.
Readers sometimes interpret PCE running lower than CPI as policymakers minimizing the problem. Another interpretation is more mundane: PCE is built to represent consumption comprehensively, not just a household’s receipts.
Substitution: why the two numbers can diverge
When chicken gets expensive, many families buy more beans, eggs, or cheaper cuts. Indexes have to decide how much of that shift to incorporate.
- CPI has incorporated limited substitution within categories since 1999 (BLS).
- PCE’s chained approach incorporates more substitution and tends to look smoother.
Critics argue heavy substitution can understate how “bad” inflation feels because people aren’t happily swapping steak for lentils; they’re coping. Supporters argue substitution reflects economic reality: people do change behavior, and a cost-of-living measure should acknowledge it.
Both views have a point. The disagreement is partly philosophical: should inflation measure the price of keeping the same lifestyle, or the price of maintaining utility by adjusting choices?
- CPI has incorporated limited substitution within categories since 1999 (BLS).
- PCE’s chained approach incorporates more substitution and tends to look smoother.
Critics argue heavy substitution can understate how “bad” inflation feels because people aren’t happily swapping steak for lentils; they’re coping. Supporters argue substitution reflects economic reality: people do change behavior, and a cost-of-living measure should acknowledge it.
Both views have a point. The disagreement is partly philosophical: should inflation measure the price of keeping the same lifestyle, or the price of maintaining utility by adjusting choices?
Disinflation vs. Deflation (and what people mean by “normal”)
Before
- Disinflation = prices still rise
- just more slowly; pain lingers even as the rate cools
After
- Deflation = overall prices fall; can feel good at checkout but often comes with layoffs and recession risk
Headline vs. core inflation: why “excluding food and energy” drives people crazy
Every time policymakers talk about core inflation, a reasonable public reaction follows: “Food and energy are exactly what I buy.”
Core inflation generally excludes food and energy because those categories are volatile month to month. Policymakers look for the underlying trend—signals that persist beyond weather, geopolitics, or seasonal swings.
Core inflation generally excludes food and energy because those categories are volatile month to month. Policymakers look for the underlying trend—signals that persist beyond weather, geopolitics, or seasonal swings.
Why core exists (and why you still shouldn’t ignore headline)
Food and energy prices can whip around enough to obscure the direction of broader inflation. Core strips that noise to help analysts see whether underlying pricing pressure is spreading.
Still, households can’t opt out of groceries or gasoline. Core can sound like a technical excuse, especially when a family’s lived inflation is dominated by supermarket and utility bills. The best way to read core is not as “real inflation,” but as trend inflation—a lens designed for forecasting and policy.
A fair approach is to watch both:
- Headline: what people actually experience right now.
- Core: whether inflation is broadening or narrowing beneath the surface.
When the two diverge, the argument isn’t about mathematics. It’s about what problem you’re trying to solve: immediate household strain or longer-term stability.
Still, households can’t opt out of groceries or gasoline. Core can sound like a technical excuse, especially when a family’s lived inflation is dominated by supermarket and utility bills. The best way to read core is not as “real inflation,” but as trend inflation—a lens designed for forecasting and policy.
A fair approach is to watch both:
- Headline: what people actually experience right now.
- Core: whether inflation is broadening or narrowing beneath the surface.
When the two diverge, the argument isn’t about mathematics. It’s about what problem you’re trying to solve: immediate household strain or longer-term stability.
Key Insight: Read headline and core together
Headline captures lived reality today.
Core helps identify whether inflation pressures are persisting or fading beneath month-to-month noise.
Core helps identify whether inflation pressures are persisting or fading beneath month-to-month noise.
Where inflation stands now: the latest CPI and PCE readings (late January 2026)
The end of 2025 offered a clearer picture after the spikes and aftershocks earlier in the decade. The basic story: inflation moderated into the high‑2% range by year-end, even if many prices remained elevated compared with earlier years.
CPI: inflation ended 2025 around 2.7% year-over-year
Major coverage of the December 2025 CPI reported CPI‑U up 2.7% year-over-year, roughly unchanged from November in several reports (WSJ coverage cited in the research). Core CPI was reported around 2.6% year-over-year for December 2025 (WSJ).
Shelter and food costs were repeatedly singled out in coverage as persistent drivers. Reports also noted food inflation picking up in some month-to-month and year-to-year comparisons (CBS News coverage referenced in the research).
Key statistics to keep straight:
- 2.7% YoY: December 2025 CPI‑U (headline CPI).
- ~2.6% YoY: December 2025 core CPI (headline excludes food and energy).
Those numbers are far from the worst of the inflation surge earlier in the decade, yet they remain above a world where prices feel stable to most households.
Shelter and food costs were repeatedly singled out in coverage as persistent drivers. Reports also noted food inflation picking up in some month-to-month and year-to-year comparisons (CBS News coverage referenced in the research).
Key statistics to keep straight:
- 2.7% YoY: December 2025 CPI‑U (headline CPI).
- ~2.6% YoY: December 2025 core CPI (headline excludes food and energy).
Those numbers are far from the worst of the inflation surge earlier in the decade, yet they remain above a world where prices feel stable to most households.
2.7% YoY
December 2025 CPI‑U (headline CPI), reported in major coverage based on BLS data.
~2.6% YoY
December 2025 core CPI, which excludes food and energy in the core measure.
PCE: the Fed’s preferred measure ran about 2.8% YoY in November 2025
BEA reported the PCE price index +2.8% year-over-year in November 2025, and +2.7% YoY in October 2025. BEA also reported core PCE +2.8% YoY in November (BEA Personal Income and Outlays release).
Context matters: the research notes that government shutdown-related timing disruptions affected some releases, with agencies referencing delays (BEA).
For readers tracking “underlying” inflation beyond headline and core, a notable additional data point appears in the Dallas Fed’s approach:
- 2.5% over 12 months through Nov 2025: Dallas Fed Trimmed Mean PCE, which removes extreme price movers.
Taken together, the late‑2025 data depicts inflation that is no longer roaring, but also not fully back to a comfortably low, steady state.
Context matters: the research notes that government shutdown-related timing disruptions affected some releases, with agencies referencing delays (BEA).
For readers tracking “underlying” inflation beyond headline and core, a notable additional data point appears in the Dallas Fed’s approach:
- 2.5% over 12 months through Nov 2025: Dallas Fed Trimmed Mean PCE, which removes extreme price movers.
Taken together, the late‑2025 data depicts inflation that is no longer roaring, but also not fully back to a comfortably low, steady state.
2.8% YoY
November 2025 PCE inflation (Fed’s preferred measure), as reported by BEA.
2.5% (12 months)
Dallas Fed Trimmed Mean PCE through November 2025, which removes extreme price movers.
Why your inflation may not match the government’s: the “basket” problem
Even if you accept every CPI and PCE method choice, a stubborn reality remains: inflation is personal.
Indexes measure averages across millions of households. Your life is not an average. People with high rent exposure experience “shelter inflation” more intensely. Long commuters experience fuel price spikes more sharply. Families with children notice food inflation instantly.
Indexes measure averages across millions of households. Your life is not an average. People with high rent exposure experience “shelter inflation” more intensely. Long commuters experience fuel price spikes more sharply. Families with children notice food inflation instantly.
Case study: two households, same CPI headline, different lived inflation
Consider two simplified households:
- Household A: renter in a high-cost metro area, no car, tight grocery budget.
- Household B: homeowner with a fixed mortgage, two cars, higher discretionary spending.
If shelter costs are a key driver in coverage—as they were repeatedly in late‑2025 CPI reporting—Household A will feel inflation as a direct hit. Household B may feel it less through housing but more through car-related categories.
Neither household is wrong; the index isn’t lying. The point is that CPI and PCE are designed for national measurement, not personal validation.
- Household A: renter in a high-cost metro area, no car, tight grocery budget.
- Household B: homeowner with a fixed mortgage, two cars, higher discretionary spending.
If shelter costs are a key driver in coverage—as they were repeatedly in late‑2025 CPI reporting—Household A will feel inflation as a direct hit. Household B may feel it less through housing but more through car-related categories.
Neither household is wrong; the index isn’t lying. The point is that CPI and PCE are designed for national measurement, not personal validation.
Perception isn’t a conspiracy—salience shapes memory
People remember the price of eggs because they buy eggs weekly. They do not remember that a laptop costs less than it did a few years ago because they buy laptops rarely.
That salience bias is normal. It also explains why “inflation is 2.7%” can land like an insult in a checkout line. The index may be accurate in its own terms while still failing to describe the emotional truth of the moment.
That salience bias is normal. It also explains why “inflation is 2.7%” can land like an insult in a checkout line. The index may be accurate in its own terms while still failing to describe the emotional truth of the moment.
Editor’s Note
Averages can be accurate and still feel irrelevant. CPI and PCE are national tools—not personal receipts trackers.
What to watch next—and how to use inflation data without losing your mind
Inflation numbers are not just trivia. They influence wage negotiations, retirement planning, and the direction of interest rates. The goal isn’t to become an amateur economist. The goal is to read the data without being misled by it.
Practical takeaways for readers
A few habits help:
- Separate the level from the rate. Prices can be high even when inflation is lower. Disinflation doesn’t mean relief at the register.
- Know which index a headline uses. CPI dominates consumer headlines. PCE frames Fed goals. Differences don’t automatically signal manipulation.
- Watch headline and core together. Headline captures lived reality; core captures trend.
- Look for category drivers. Late‑2025 coverage repeatedly pointed to shelter and food pressures; those categories often dominate household perception.
- Expect revisions in chained measures. BLS’s C‑CPI‑U is revised and final with lags (roughly 10–12 months), which is why it’s less common in breaking-news headlines.
- Separate the level from the rate. Prices can be high even when inflation is lower. Disinflation doesn’t mean relief at the register.
- Know which index a headline uses. CPI dominates consumer headlines. PCE frames Fed goals. Differences don’t automatically signal manipulation.
- Watch headline and core together. Headline captures lived reality; core captures trend.
- Look for category drivers. Late‑2025 coverage repeatedly pointed to shelter and food pressures; those categories often dominate household perception.
- Expect revisions in chained measures. BLS’s C‑CPI‑U is revised and final with lags (roughly 10–12 months), which is why it’s less common in breaking-news headlines.
Use inflation data without getting misled
- ✓Separate the level from the rate (high prices can persist even as inflation slows)
- ✓Check whether a headline is using CPI or PCE
- ✓Track headline and core together—experience vs trend
- ✓Scan the category drivers (often shelter and food)
- ✓Remember chained measures can be revised later
Multiple perspectives worth holding at once
Some critics argue substitution methods understate hardship because they treat forced trade-downs as neutral. Others argue failing to model substitution overstates inflation by assuming people never adapt. CPI and PCE embody these tradeoffs differently; neither eliminates them.
A wiser stance is pragmatic: treat inflation measures as instruments. You don’t blame a thermometer for not describing how sick you feel. You use it alongside symptoms and context.
The late‑2025 figures—2.7% CPI in December and 2.8% PCE in November—suggest a U.S. economy in a cooling phase rather than a crisis phase. That’s real progress by the numbers. The harder truth is that households live with the price level that earlier inflation locked in.
The next chapter of the inflation story will be less about shock and more about persistence—how quickly wages, rents, and everyday budgets adjust to a new baseline.
A wiser stance is pragmatic: treat inflation measures as instruments. You don’t blame a thermometer for not describing how sick you feel. You use it alongside symptoms and context.
The late‑2025 figures—2.7% CPI in December and 2.8% PCE in November—suggest a U.S. economy in a cooling phase rather than a crisis phase. That’s real progress by the numbers. The harder truth is that households live with the price level that earlier inflation locked in.
The next chapter of the inflation story will be less about shock and more about persistence—how quickly wages, rents, and everyday budgets adjust to a new baseline.
T
About the Author
TheMurrow Editorial is a writer for TheMurrow covering explainers.
Frequently Asked Questions
What is inflation in plain English?
Inflation means prices are rising across the economy over time, so your money buys less. It doesn’t mean “prices are high” in a static sense; it describes the ongoing change. When inflation falls, prices usually still rise—just more slowly.
If inflation is around 2.7%, why do groceries still feel expensive?
A lower inflation rate means prices are increasing more slowly, not reversing. Grocery prices can remain elevated after earlier increases. People also buy groceries frequently, so changes are highly noticeable compared with categories purchased rarely.
What’s the difference between CPI and PCE?
CPI (BLS) tracks prices paid by urban consumers and is widely used in headlines and cost‑of‑living adjustments. PCE (BEA) has a broader scope and more substitution, and it includes spending on behalf of households (like employer-paid healthcare). The Fed frames its 2% goal around PCE.
What does “core inflation” mean, and why exclude food and energy?
Core inflation excludes food and energy because they can swing sharply month to month, making it harder to see the underlying trend. Policymakers use core to gauge persistence. Households still need food and energy, so headline inflation often matches lived experience better.
What were the latest official inflation readings?
Late in 2025, reported readings clustered in the high‑2% range. December 2025 CPI‑U was about 2.7% year-over-year, with core CPI around 2.6% (major reporting based on BLS data). PCE inflation was about 2.8% year-over-year in November 2025, with core PCE also 2.8% (BEA).
Why doesn’t the inflation number match my personal experience?
Indexes measure an average “basket,” but households don’t spend like the average. If your budget is heavy on rent, groceries, or commuting, your personal inflation can exceed the national figure. Salience also matters: people notice frequent purchases more than occasional ones, even when both are in the data.
