> But isn't inflation measured by some kind of average price index? CPI (Consumer Price Index) is often used to measure inflation, but is an imperfect measure.

> But isn't inflation measured by some kind of average price index? CPI (Consumer Price Index) is often used to measure inflation, but is an imperfect measure. First, it only measures the prices of household consumption, not wages, business expenses, etc. Second, as this BLS article says: "The CPI has been criticized for having both an upward bias (overstating inflation) and a downward bias (understating inflation). Much of the criticism asserting an upward bias comes from the academic community. In 1995, Congress, aware of such criticism, commissioned a group of academic economists, led by Michael Boskin, to study and report on the CPI. The resulting study, titled "Toward A More Accurate Measure Of The Cost Of Living" (but often referred to as the Boskin Report), summarized the viewpoint that the CPI was upwardly biased. The report asserted that the CPI overstated inflation because of three main reasons: it omitted consumer substitution, did not fully account for quality change, and failed to properly reflect the addition of new goods. BLS has introduced some methodological changes since the report came out in 1996. Although these changes were intended to make the CPI more accurate, some think that they have introduced a downward bias." https://www.bls.gov/opub/btn/volume-1/consumer-price-index-data-quality-how-accurate-is-the-us-cpi.htm https://www.bls.gov/opub/btn/volume-1/consumer-price-index-d... > Is it possible to measure "how much money public will want to hold"? No, not directly. We can only measure proxies, then debate how useful the proxies are. The more holistic a metric is, the better a gauge of inflation it is. To the extent it measures relative price changes, rather than total-market price changes (including the price of labor), it may incorporate economic effects other than inflation. One flaw of the CPI for serving as a complete measure of inflation is right there in the name: Consumer Price.