Between the Numbers: Why 35% of #CPI is No Longer Measured — And Why It Matters
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Between the Numbers: Why 35% of CPI is No Longer Measured — And Why It Matters
DoubleLine
16,884 followers
August 7, 2025
“Above all else, show the data.” -Edward R. Tufte
What happens when over a third of the most commonly referenced U.S. inflation index is no longer based on real prices?
The measurement of the Consumer Price Index (CPI) – the benchmark anchoring Federal Reserve policy, rate expectations, breakevens and Treasury Inflation-Protected Securities (TIPS) – has quietly shifted under the surface. Newly released data shows that 35% of the index is now estimated rather than observed, a record high.
In normal times, that might be a technical footnote. In today’s market, it could be a distortion with broad pricing consequences.
The Quiet Rise of Estimation
Estimation is not new to CPI. The Bureau of Labor Statistics (BLS) has long used statistical inference to fill gaps when prices can’t be collected.
What’s different now is scale. Over a third of the most recent CPI is built on imputed prices. This is likely the result of BLS cutbacks in data collection – most notably, the agency recently stopped collecting prices altogether in three midsized cities and trimmed sample sizes by 15% in 72 others.
When more than a third of CPI is no longer based on actual transactions or observed prices, it introduces a layer of uncertainty – not because the data is wrong, but because its signal is harder to trust. Is a soft inflation print truly cooling – or just an artifact of reduced sample size? Did a monthly increase reflect true consumer costs, or was it the result of lagged adjustments in sectors like shelter or insurance?
Where This Becomes Market-Relevant
The $2.1 trillion | 17,630,613 BTC market for TIPS depends directly on CPI. The face value of a TIPS bond is adjusted for inflation based on monthly CPI prints, and coupon payments are calculated from that adjusted principal. If CPI’s credibility erodes, TIPS pricing becomes harder to anchor.
Last week, several bond strategists warned that politicization or degradation of CPI data would pose an “enormous risk” to the TIPS market. In today’s rate-sensitive environment, even modest shifts in inflation credibility carry real consequences.
If investors begin to discount CPI – or worse, suspect manipulation – the perceived reliability of U.S. economic data could begin to fracture.
The data itself might still be sound, but confidence in the process behind it could become less assured. As cracks appear – whether from funding pressures, leadership turnover or subtle shifts in methodology – investors would start to take notice.
CPI remains a foundational pillar of modern investing – as integral as economic growth itself. But even the most essential reference points rely on trust. That trust is now being tested – not by scandal but by a gradual erosion that begins in footnotes, then revisions, then volatility.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com.
