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THE ECONOMY

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<i> Times Staff and Wire Reports</i>

Key Government Forecast to Use Pared Down CPI: Freeing billions of dollars for deficit reduction, the Congressional Budget Office will include in its new economic forecast changes that will shave as much as 0.3 of a percentage point annually off the consumer price index. The CPI is the government’s chief inflation gauge. The budget office said its latest forecast, due Dec. 12, will incorporate changes to the index planned by the Bureau of Labor Statistics for January 1997. Correcting the “formula bias” in the CPI will reduce the index between 0.1 and 0.3 percentage points per year, a BLS commissioner told GOP congressional leaders last month. The BLS is making the change after concluding that the CPI has been overstating inflation. Cutting the CPI makes it easier to balance the budget, because it is used to index government benefits such as Social Security and government pensions.

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