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Key takeaways
- CPI is the most widely cited measure of U.S. inflation.
- The Federal Reserve targets ~2% annual inflation as a long-term goal.
- Inflation erodes the real value of cash and fixed-rate debt; it can benefit borrowers and asset owners.
- Long-term planning should always discount nominal returns by expected inflation.
How Olomon thinks about this
Olomon tracks both nominal balances and trend inflation, so households and advisors can make decisions — retirement contributions, real-estate carrying costs, charitable giving — with real purchasing power in mind.
Quick facts
In-depth definition
Inflation is the silent factor in nearly every financial decision. A 5% nominal return in a 4% inflation environment is barely 1% in real terms. Plans built on nominal numbers without inflation adjustment systematically over-promise. The Bureau of Labor Statistics publishes the Consumer Price Index (CPI-U) monthly[1], and the Federal Reserve targets a 2% inflation rate over the longer run, measured against the Personal Consumption Expenditures (PCE) price index.[2]
Frequently asked questions
Most commonly by the Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the U.S. Bureau of Labor Statistics. The Federal Reserve also relies on the Personal Consumption Expenditures (PCE) price index for monetary policy.
Sources
Primary, authoritative references.
- 1
U.S. Bureau of Labor Statistics
Consumer Price Index — BLSCited for: Authoritative U.S. inflation measure
- 2
Board of Governors of the Federal Reserve System
Why does the Federal Reserve aim for inflation of 2 percent over the longer run?Cited for: Fed inflation target
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Cite this page
APAOlomon Editorial Team. (2026). Inflation. Olomon Financial Glossary. https://olomon.com/financial-glossary/inflation