How Is Inflation Measured? The Consumer Price Index and Why Iran's Statistics Center and Central Bank Differ

Statistics say inflation is eighty nine percent, the Central Bank says eighty four. How is this number built? This number is not trivia. Pensions, wages and your real deposit return are tied to this very rate. Imagine a basket: forty percent housing and energy, thirty percent food, ten percent transport, twenty percent the rest. To measure inflation, we pick a base year and set that years index at one hundred. In the base year this basket cost one hundred thousand tomans. A year later, one hundred eighty thousand. Three rates exist. Monthly versus last month, year over year versus last year, and the annual average of twelve months. Here, monthly inflation is three point three percent, year over year eighty percent, annual average near sixty five. Watch only the monthly rate, and you might think pressure eased, even while year over year inflation stays high. In Iran, the Statistics Center measures this nationwide, while the Central Bank measures mostly urban areas. In Mordad fourteen oh five, the Center reported eighty nine percent, versus eighty four point four at the Bank. The annual average differed too: sixty nine point nine percent at the Center, sixty five point one at the Bank. That month, the poorer second decile saw inflation near seventy eight percent, the richest only sixty seven point six. Avoid four mistakes: mixing up the rates, treating the index as a price, assuming inflation hits everyone equally. So inflation is the percent change in a fixed baskets index, and you should always ask which rate you are reading. Now you have the answer. Inflation is a percent change, not the price itself. Which rate were you reading?