The Prehn Institute Publishes Report Finding CPI Understates Inflation for Asset-Poor US Households

DUBAI, UAE, October 30th, 2026, FinanceWire

The Prehn Institute has published The Hidden Regressive Tax, a research report finding that the consumer price index understates the inflation experienced by US households with few assets. In 2024, the lowest-income fifth of US households put 15.7 per cent of their spending into food, against 11.3 per cent for the highest-income fifth, according to the Bureau of Labor Statistics.

That gap bears on an argument made in the report from The Prehn Institute, an independent research institution. The report’s author, Felix Nikolas Prehn, is an economist and former investment banker. He contends that the consumer price index understates what rising prices cost households with few assets.

Scope of the Index

The institute’s paper, “The Hidden Regressive Tax,” is free to read on Zenodo. Posted as a preprint on 25 September 2026, its main subject is where newly created money went and what it did to the prices of the things that money buys. Between 2000 and 2026, it reports, consumer prices rose far less than the M2 money supply, and the question it asks is who gained and who lost along the way.

The debate over consumer prices was quiet for most of that period, the paper observes, because the index rose about 2 per cent a year until 2020. It grew louder after 2021, when food and rent rose faster still.

One passage turns to the inflation gauge itself. The paper describes the consumer price index as an average of price changes across the country, with each item counted according to what all households spend on it. A household whose budget differs from that average experiences a different rate of inflation, and the paper states that for lower-income families the difference points upward.

The Long-Run Gap

Three categories take a larger share of income in lower-income households, the paper notes: food, energy and rent. Each outpaced the headline number across long stretches.

Between 2000 and 2026, the paper reports, the CPI for food rose 111 per cent and the CPI for energy rose 178 per cent, against 96 per cent for all items, with BLS data running through August 2026.

The pattern did not fade after the pandemic. From January 2021, the paper reports, the CPI rose 27 per cent and its food component rose 29 per cent. Over that period, the Federal Reserve’s balance sheet initially expanded, reaching its peak in 2022 before contracting. A household spending heavily on groceries saw a larger increase than the headline described.

Rent, the third category, rose 30 per cent from January 2021 and 147 per cent between 2000 and 2026.

Budgets by Income

BLS’s Consumer Expenditure Survey, whose 2024 results the agency released on 19 December 2025, shows why the weighting matters. It sorts households into fifths by income and reports what share of total spending each fifth puts into each category.

The lowest fifth is every consumer unit with income before taxes below $29,932, the point where the second fifth begins. Those units spent an average of $35,046 in 2024, against $150,342 for the highest fifth.

Utilities, fuels and public services took 8.4 per cent of total spending in the lowest-income fifth in 2024 and 4.4 per cent in the highest. Electricity alone accounted for 3.6 per cent against 1.6 per cent. Groceries and the power bill claim more of a lower-income budget, so a rise in either one is felt more there.

The highest-income fifth spent more on food in dollars, averaging $16,989 a year against $5,498 for the lowest. Yet food was the larger share of the lowest fifth’s budget. Food bought for the kitchen alone took 11.0 per cent of the lowest fifth’s spending and 6.2 per cent of the highest fifth’s, so the grocery bill is where the difference is easiest to see.

For lower-income households, food and electricity make up a bigger part of the monthly outlay than they do at the top of the income scale, and the paper counts rent among the categories that weigh more heavily on lower-income households. Those bills arrive every month and are hard to defer.

When grocery and energy prices climb faster than the headline index, a lower-income renter with few assets experiences inflation that runs ahead of the published figure. That same renter is also unlikely to own the stocks and houses that gained in value over the period, which is the paper’s wider finding about households with few assets.

The Latest Reading

The BLS release for August 2026, issued 11 September 2026, shows both directions at once. Over 12 months, the energy index rose 16.3 per cent, and electricity, the line on the monthly power bill, rose 3.8 per cent. Food rose 2.7 per cent, below the 3.4 per cent increase for all items.

So over that year, energy carried the gap while food trailed the headline. The paper’s claim concerns long stretches of the period, not single 12-month readings.

The Paper’s Reading of the Gap

The paper does not fault the way the index is assembled. It treats the weighting as a property of a national average, one that fits some households better than others.

Its term for the households the average fits least well is the asset-poor: families that own few of the stocks and houses whose values rose over the period, and so have no gains to set against higher bills.

For those households, it concludes, the published rate marks the least they experienced.

About The Prehn Institute

The Prehn Institute is an independent research institution founded by Felix Nikolas Prehn, an economist, former investment banker and author of The Hidden Regressive Tax. It publishes research on the financial markets and provides instruction in professional market practice.

Disclaimer

This press release is for informational purposes only and does not constitute investment or financial advice.

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