It is used to adjust certain economic variables, such as tax brackets and Social Security payments, for inflation.
The traditional measure of inflation, known as the "headline CPI," assumes that consumers continue to buy the same basket of goods and services over time, even as prices change.
However, in reality, consumers may adjust their spending habits in response to changes in prices.
The chained CPI accounts for these changes in consumer behavior by calculating the cost of a "chained" basket of goods and services that reflects how consumers adjust their spending in response to price changes.
[3] The advantage of using the chained-dollar measure is that it is more closely related to any given period covered and is subject to less distortion over time.