Consumer Price Index (CPI)

Definition

CPI is a measure that tracks changes in prices paid by consumers for commonly purchased goods and services over time. It helps gauge inflationary trends and cost-of-living adjustments.

Analogy

Think of CPI as an index finger on the pulse of consumer prices. Just like how a doctor uses their finger to check your pulse, CPI checks the health of prices in the economy.

Related terms

Producer Price Index (PPI): A measure that tracks changes in prices received by producers for goods and services. It helps analyze inflationary pressures at earlier stages of production.

Core Inflation: A measure of inflation that excludes volatile food and energy prices, providing a more stable indicator of underlying price trends.

Base Year: The year against which other years are compared when calculating price changes in an index like CPI.