The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
In Depth
The CPI is a key indicator of inflation, showing how much the cost of living is changing. It tracks prices for a wide range of items, including food, housing, transportation, and medical care. Economists and policymakers use the CPI to understand the health of the economy and make decisions about interest rates and other financial policies. A rising CPI means that goods and services are becoming more expensive, reducing the purchasing power of money.
Example
If the Consumer Price Index rises by 3% in a year, it means that, on average, the cost of goods and services for consumers has increased by 3% during that period.