What is the reference base period’
Reference base period is the year in which the consumer price Index, change in consumer prices in the US equal to 100. The reference base period serves as a benchmark for future periods, allowing economists to judge inflation in the U.S. over time.
The reference base period provides an easy way for analysts to convey how much inflation occurred from one year to the next. For example, if the current year CPI 115, and it would mean that prices increased by 15% compared to baseline year when inflation was 100.
Breaking reference base period’
Reference base period is set between 1982 and 1984. Therefore, if the consumer price index has increased with reference to the base period, when it was priced at 100, to 118.3 in 1988, consumer prices rose by 18.3% over that period of time.
However, you need to make a small calculation to determine the percentage change in the consumer price index between the two years, namely:
The percentage change in the consumer price index = (final value of consumer price index – CPI initial value)/ initial value of CPI * 100.
For example, assume that the CPI 245.12 in 2017 and 207.3 in 2007.
For the calculation of consumer price growth from 2007 to 2017, to take:
The value of the consumer price index in 2017, minus the value of the CPI in 2007 to obtain 37.82.
Next, take 37.82 divided into 207.3 to 0.1824.
Then take 0.1824 and multiply by 100 to get 18.24%
Please note that 18.24% of the cumulative rise in consumer prices in 10 years, not the average increase in the consumer price index for the year.
To get an idea about the change in consumer prices on an annual basis, it is not necessary to know the starting point, provided reliable sources for the calculations. In the US Bureau of labor statistics offers many such tables, as does the Federal Reserve Bank of Minneapolis, which provides the annual change in the consumer price index takes place in 1913.
The reference base period for CPI components
While most of the offspring of the CPI use the same a period, several to use another. For example, the consumer price index at the expense of urban consumers, U.S. Bureau of labor statistics said, is about 93% of the total U.S. population. The BLS measures inflation in consumer prices for all urban consumers, using two separate indices, namely the consumer price Index for all urban consumers and the chained consumer price index for all urban consumers. While the former has the same base year of the CPI, the latter uses a base of December 1999.