On Wednesday, the U.S. government is expected to report that consumer prices rose by 3.4% in July from a year earlier, or by 2.5% for those who don't use food or energy. While government CPI data can be debated, these official numbers matter for tax brackets, Social Security payments, and retirement-account contribution limits. They also influence Treasury interest rates, which serve as the risk-free benchmark for investors. The longest-term Treasury Inflation Protected Securities (TIPS) now yield nearly 3% in real terms—higher than they've been in decades. This occurs at an intriguing time given current economic conditions. Locking in a guaranteed 3%, inflation-adjusted return for almost 30 years isn't competitive with the 6.8% or so U.S. equities have averaged over similar spans, also adjusted for inflation. However, the risk-free nature of TIPS makes them attractive when real yields are this elevated.

Investors should consider this opportunity carefully, weighing the guaranteed real return against potential equity performance. The 3% real yield on long-term TIPS represents a significant shift from historical norms and offers portfolio diversification benefits.

Despite skepticism toward government data, the practical implications of CPI figures extend far beyond statistics, directly affecting financial planning and investment decisions across retirement accounts and social security benefits.