In June, the U.S. Bureau of Labor Statistics (BLS) announced the largest 12-month increase in the Consumer Price Index for All Urban Consumers (CPI-U) since 1981. Although inflation has moderated somewhat, it still remains very high. The question is the extent to which the effects of inflation vary for households with different income levels.

This brief addresses the distributional question with a straightforward analysis that weights the eight major categories in the CPI-U by expenditure data from BLS’s Consumer Expenditure Survey (CEX) for each income quintile. The confounding issue, however, is that low-income households spend virtually all their after-income-tax money on inflation-affected items, while high-income households spend only 80 percent of their resources on these items.