[npoc]

True inflation is money supply inflation. Doubling the amount of money (diluting the total value across more monetary units e.g. dollars), halves the value of each monetary unit, doubling prices.

This is why hard assets, like gold, housing increase in price at approximately the same rate that the banks increase the money supply (historically the number of dollars doubles every decade, other currencies are even worse).

If people saw the same increases in consumable prices as hard assets then they would be become aware of the falling value of the currency and the currency would quickly collapse in value as they stored their wealth in other things (hyper-inflation). However, the continuous optimisation of production through efficiencies of technology and associated automation means that consumables take less and less human time/effort to produce and so are going down in value at rate of around -5% year. This offsets the 7% devaluation of the dollar to give an overall price increase of consumables of 7-5 = 2% which is a level that the population finds acceptable without losing faith in their currency.

However, in recent decades the recent struggle and failure to keep devaluation of the dollar at 7%/year means that the official inflation figures need to be massaged, and so hard assets are removed from the basket goods used in the algorithm (e.g. housing related costs) and more consumables that have benefited from increased automation and reduced value are added.

If you run the algorithm used say 15 years ago, you'll find that it produces a much higher inflation figure than the one used today.