The rate of inflation is a measure of the Consumer Price Index, according to Saint Joseph’s College. Inflation control is a part of the monetary policy set by the Federal Reserve that involves the fluctuation of interest rates and the selling of bonds through the U.S. Treasury.Continue Reading
The U.S. government uses the Consumer Price Index to measure the rate of inflation over a period of time, according to the Library of Economics and Liberty. This is the difference of the value of products along with a measure of consumer spending. Officials use movement in the Consumer Price Index to determine monetary policy.
To curb the increase in prices relative to the value of the dollar, the Federal Reserve increases interest rates in order to slow demand, according to About.com. This occurs through the selling of U.S. Treasury bonds. The Federal Reserve also has the power to raise the rate it charges member banks to borrow money or the amount of money a bank must keep on hand in order to control inflation.
An alternative to the Consumer Price Index is the chained Consumer Price Index, which takes into account cost of living standards and other statistically weighted measures, according to the Library of Economics and Liberty. The chained Consumer Price Index indicates a lower rate of inflation than the Consumer Price Index.Learn more about Financial Calculations