A Faulty Gauge for Inflation

July's stunning 15.4% annual rise in the consumer price index dramatized anew a serious flaw in the way the Government measures inflation. The Bureau of Labor Statistics calculates the consumer price index on the basis of the price of a variety of goods and services that an average family buys during a month. Housing costs account for 25.8% of the CPI, since that is how much of its budget a typical family spends on shelter. A sharp jump in mortgage rates, such as has occurred in the past few months, can thus have an important effect on the level of...

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