Why Inflation is Underestimated

Inflation has been averaging close to 3% for the past couple of decades which is 50% higher than the federal reserve’s 2% targeted goal. In my opinion the real inflation rate could be double what the reported inflation rate is, so it could have been averaging closer to 6% annually. This is partly why asset prices have done so well in the past couple decades. The reason for this is because the way inflation is calculated doesn’t give a real picture in most people’s lives. They simply remove some products and services if that product or service increases prices too much to a lower cost similar product or service that most people don’t usually switch to as an alternative. Also, food inflation is a lot higher than what’s reported because of the reason mentioned above but also srinkflation which is when company decrease the size/weight of a product and can sell it for the same or higher price therefore you are paying more for the same product than what you would normally have paid.

In my opinion all 50 states (whether it is a private or public company) should gather the top 20 selling products and services in various places in every state and NOT substitute an alternative unless something is replaced in the top 20 selling products or services and also include srinkflation.

The result of this would in fact probably raise interest rates until inflation is truly back to the 2% targeted goal and then they can lower it at that point.

Also, people who get “cost of living” raises based on the inflation rate is probably actually still worse off because the raise isn’t actually keeping up with inflation since the inflation rate is underestimated especially in places (usually high populated areas) where the reported inflation rate is higher than the national average.