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CPI-U

As explained in Build a Robo-Advisor with Python (From Scratch)

CPI-U is the Consumer Price Index for All Urban Consumers, a measure of average consumer prices paid by urban households in the United States.

CPI-U measures average consumer prices paid by urban households in the United States. The CPI-U All Items, Not Seasonally Adjusted series is identified in FRED as CPIAUCNS. section 5.7

Use CPI-U data to construct annual inflation inputs:

  • Feed the resulting inflation series into a mean-reverting AR(1) model for Monte Carlo wealth simulations. section 5.7

Recent year-over-year observations

The annual inflation rate rose from 1.4% at the end of 2020 to 7.0% in 2021, fell to 6.5% in 2022, and reached 3.5% in 2023. section 5.7

How Build a Robo-Advisor with Python (From Scratch) covers it

How deep it goes
Transforms monthly CPI-U into annual inflation and applies it in an AR(1) simulation, without developing the index’s construction.
Examples
Uses CPIAUCNS data, annual percentage changes, and 2020–2023 inflation observations as concrete examples.
What it assumes
Assumes basic Python data handling and introduces FRED retrieval, resampling, and percentage-change calculations.
What you can do after
Apply via pandas-datareader and pandas to download CPI-U, create annual inflation rates, and supply simulation inputs.
How it connects
Connects CPI-U with inflation, FRED, AR(1) processes, mean reversion, CPI-W, PCE, and Monte Carlo simulation.
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Related concepts

This explainer was generated by Manning's knowledge graph from the text of Build a Robo-Advisor with Python (From Scratch). The section links point to the parts of the book it draws on.