Reference Base Period

What is the Reference Base Period?

The reference base period is the year in which the Consumer Price Index, measuring changes in consumer prices in the U.S., is equal to 100. A reference base period fills in as a benchmark for future periods, allowing financial experts to judge the rate of U.S. inflation over time.

The reference base period gives a simple way to analysts to convey how much inflation has occurred over time. For instance, on the off chance that the current year has a CPI of 115, this would mean that prices today have increased by 15% from the base year, when CPI was 100.

Understanding the Reference Base Period

The reference base period for the Consumer Price Index for All Urban Consumers (CPI-U) and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is currently set between 1982 and 1984. In this manner, assuming CPI rose from the reference base period, when it was valued at 100, to 118.3 by 1988, consumer prices would have risen by 18.3% over that time period.

However, one requirements to perform a slight calculation to decide the percent change in CPI between any two years, as follows:

Percent change in CPI = (end value of CPI - begin value of CPI)/begin value of CPI * 100.

For instance, assume CPI is 245.12 in 2017 and 207.3 in 2007. To calculate the rise in CPI from 2007 to 2017, take:

• CPI value in 2017, minus the CPI value in 2007 to get 37.82.
• Next, take 37.82 isolated by 207.3 to get 0.1824.
• Then, at that point, take 0.1824 and multiply by 100 to get 18.24%

Note that the 18.24% mirrors the aggregate rise in consumer prices over the 10 years, and not an average increase in CPI each year.

To get a feeling of the change in consumer prices year-over-year, it isn't important to know the reference base year, gave a trusted source as of now has performed the calculations. The U.S. Bureau of Labor Statistics offers many such tables, as does the Federal Reserve Bank of Minneapolis, which gives the annual change in CPI returning to 1913.

Reference Base Period for CPI Components

While most branch-offs of CPI use a similar reference base period, a few use an alternate one. For instance, CPI considers spending by urban consumers, which the U.S. Bureau of Labor Statistics expresses addresses about 93 percent of the total U.S. population. The BLS measures consumer inflation for all urban consumers using two separate indexes, in particular, the Consumer Price Index for All Urban Consumers and the Chained Consumer Price Index for All Urban Consumers. While the former has similar base year as CPI, the last option uses a base of December 1999.