Our friends at the Military Officers Association of America maintain a constant watch on the factors that determine the cost of living adjustment for military retirement pay, VA compensation and pension, and social security benefits.
According to MOAA, the inflation rate rose 0.3% in August. This marks several months of steady inflation increases, which will most likely result in a 2012 COLA rate of 3.7%. This will mark the first COLA increase in two years.
However, there is a proposal to change the basis for COLA to the Chain Consumer Price Index for All Urban Consumers (or C-CPI-U). According to Tom Philpott, adopting the Chain CPI to adjust entitlements has been recommended by every group looking for ways to address the federal debt crisis. The new index could reduce the COLA by .3% with a 2012 COLA rate closer to 3.4%.
Keep tabs on month-to-month inflation trends on MOAA's COLA Watch webpage.