Weighting to exhale

This coming Tuesday, the Bureau of Labor Statistics will release January Consumer Price Index, offering the first major read on inflation in 2023.

• In a notable wrinkle, it will also tweak how it weights different goods and services, based on Americans' recent buying patterns.

State of play: Previously, the agency has updated those weights every other year, adjusting price swings in anything from bananas to used cars, and how those ought to affect the overall inflation index.

• For example, gasoline had a 3.431% weight in 2017-2018, which fell to 2.977% in 2019 and 2020.
• Now, the BLS is shifting to re-weighting CPI every year.

The re-weighting shouldn't radically shift the inflation numbers, but it could make analysts' forecasts a little less accurate, given uncertainty about how the numbers will look.

• The new weights "introduce additional uncertainty to our forecasts," said BofA economists in a note this morning.
• "While we do not expect the new weights to change the outcome materially, it could add or subtract" a few basis points from their forecast.

Go deeper: BLS explained the process in a blog post here.