
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, October 22, 1994                   TAG: 9410240040
SECTION: BUSINESS                    PAGE: A6   EDITION: METRO 
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON                                 LENGTH: Short

U.S. CHANGING PRICE INDEX AS A WEAPON IN INFLATION WAR

The Federal Reserve has been jacking up interest rates, but the Labor Department has found a more subtle way to fight inflation: It is going to overhaul the government's measure of the cost of living.

Effects of the changes in the Consumer Price Index won't be huge - perhaps shaving 0.1 percentage point off the annual inflation rate.

But even that small amount will be felt in the pocketbooks of millions of Americans because the index is used to make annual cost-of-living adjustments in Social Security and other government benefits.

The Labor Department is scheduled to announce the measurement changes when it releases its next consumer price report on Nov. 16. The changes will take effect with January's report.

In papers explaining the changes, obtained by The Associated Press, the government said it was modifying how it tracks shelter costs, prescription drug prices and the price of food consumed at home.

The change in drug prices, for example, will result in the government's giving less weight to brand-name prescription drugs and more to generic drugs, which are taking a larger share of sales.

``None of the things we are doing will be major changes, but they will have an impact,'' said Patrick Jackman, an economist with the Bureau of Labor Statistics.

by CNB