About 3.0%, as of January 2025. Inflation refers to the rise in prices of goods and services over time, which reduces the purchasing power of the dollar. The inflation rate is the percentage that describes how quickly these prices are rising. While several government datasets track price changes, the Consumer Price Index (CPI) represents about 90% of the US population. The CPI measures inflation by tracking the price fluctuations of a “basket of goods and services” over time, providing a clear picture of how inflation affects everyday living expenses.

The CPI tracks two measures of inflation: headline and core. Headline inflation tracks specific subsets of consumer spending like food, housing, and transportation to reflect the actual cost of living. The “basket of goods” is meant to represent the actual spending habits of a typical consumer in the US. Core inflation tracks all other spending categories.

In January 2025, the headline inflation rate was 3.0% and core inflation was 3.3%.

When inflation rates are positive, it means that the price of goods is increasing. When inflation decreases—for example, from 9.1% in June 2022 to 3.0% in June 2023—prices are still rising, just at a slower pace than before. If the inflation rate is above zero, prices are rising. Prices only fall during deflation, which occurs when the inflation rate drops below zero, signaling a general decline in the cost of goods and services.

Since the CPI was first measured in 1913, inflation has fluctuated but has generally remained positive. The last time headline inflation exceeded 10% was between July and October 1981. The all-time high was in June 1920, when inflation reached 23.7%. The most recent month in which there was deflation was April 2015.

Price changes within the basket of goods can vary widely. To account for this, the CPI uses a weighted system to represent how much the average consumer spends on a particular category it compared to everything else, so housing-related costs have more weight than something like recreation.

The weighted system means that even if the prices of some items spike the headline inflation rate reflects the overall change in costs across the entire basket of goods. While the current headline inflation rate is 3.0%, the cost of eggs has increased by 53.0% compared to the previous year. On the other hand, appliances prices have dropped by 4.2%.

When only looking at items considered in the core inflation rate, motor vehicle insurance had the highest price increase at 11.8%. Appliances dropped the most (-4.2%).

The CPI is representative of all urban areas in the US. Because every area has its own mix of supply and demand, inflation rates differ by location too. Based on data from January 2025 for urban areas tracked in the CPI, the Chicago, IL area had the highest inflation rate at 4.3%.