Macroeconomics › Section I · Inflation › Topic I.5
Indexing and its limits
If inflation hurts mainly because some payments fail to keep up, one fix is obvious: tie those payments to a price index. Indexing protects tens of millions of Americans, from retirees to bondholders, but it is always partial, it works with a lag, and it can make inflation harder to stop.
In this topic
- What indexing means
- Indexing in private contracts
- Adjustable-rate loans
- Social Security and its COLA
- Worked example: calculating the 2027 COLA
- Indexing in the tax system
- Inflation-protected bonds
- Worked example: TIPS against an ordinary bond
- The limits of indexing
- Can indexing keep inflation going?
- Common mistakes to avoid
- Key takeaways
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