1Her life
Maya fills up her car on the way to work. Last month it cost her about $41. This month, the same tank costs about $45.
Her groceries are about the same as last month. But rent went up when she renewed her lease, and her car insurance bill is higher too.
She's buying the same things as before. Her money just buys a little less.
2How it works
Inflation is prices rising across the economy over time. Not one thing getting pricier, but the general level of prices going up. If inflation is 3% for a year, a cart of groceries that cost $100 last year costs about $103 now. Each dollar buys a little less. That's called losing purchasing power.
Why prices rise. There are two big reasons, and they often happen together:
- Too much demand. When people and businesses want to buy more than the economy can make (chapter 4), sellers can raise prices.
- Higher costs. When something everyone needs, like oil, gets more expensive, businesses pass the cost along: gas, shipping, plane tickets and more.
How it's measured: the CPI (Consumer Price Index). Every month, the BLS (Bureau of Labor Statistics) prices a big "basket" of what households buy: food, gas, rent, clothes, doctor visits, car insurance and much more. It weights each item by how much people spend on it. Housing is the heaviest piece. Rent and what homes would rent for (the BLS calls this "shelter") make up a little over a third of the basket. The report comes out once a month, at 7:30 AM CT (Central Time).
Two ways to read the same report.
- Monthly vs. yearly. "Prices rose 0.6% last month" and "prices are up 3.7% from a year ago" can come from the same report. News stories usually give both. The yearly number is the one people quote most.
- Headline vs. core. Headline CPI counts everything. Core CPI leaves out food and energy, which jump around a lot, to show the steadier trend underneath.
What the Fed aims for. The Federal Reserve (the Fed) aims for inflation of 2% a year over time. It measures that with a related gauge called the PCE (personal consumption expenditures) price index, but watches CPI closely too.
Why it matters for Maya. If her savings account pays 3% and prices rise 3.7%, her money still buys a little less at the end of the year. Interest only gets her ahead when it beats inflation.
3It really happened
3.7%
The BLS reported that consumer prices rose 0.6% in September, and were up 3.7% from a year earlier. Gasoline alone jumped 9.1% in a single month, and that one item accounted for more than half of the whole increase.
See it in Historical Data →Core 0.3%
Core prices, without food and energy, rose 0.3% for the month. Economists polled by Reuters had expected 0.2%. Over the year, core prices were up 2.6%.
+3.6%
The Social Security Administration announced that benefits will rise 3.6% in 2027, about $75 a month on average, according to the agency. The raise is set each year from a version of the CPI called the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers), so that the checks keep up with prices.
The honest part
One month is not a trend. Gas prices can jump one month and fall the next, which is why the Fed pays close attention to core. And for scale: in June 2022 (chapter 1), prices were up 9.1% from a year earlier. Inflation of 3.7% is far below that, but still well above 2%, the Fed's goal. (The Fed measures its goal with PCE, which usually runs a little below CPI.)
← Chapter 4: Everyone spendsAll chapters
Sources for this chapter (6)
- BLS: Consumer Price Index, September 2026 (released Oct 14)
- Reuters via KSL: Consumer prices accelerate in September
- BLS: Shelter in the CPI (relative importance)
- Social Security Administration: Latest cost-of-living adjustment
- ABC News: Social Security raise of 3.6% for 2027
- Federal Reserve: Statement on longer-run goals (2% goal, PCE)
Maya and Jordan are fictional; every number in "It really happened" is real and sourced. We explain how it works. What you do with it is your call. Commentary and education only. Not financial advice.