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Serving Transparency in Capital Markets
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Market Data Network

CPI - Consumer Price Index

The Consumer Price Index (CPI) is a measure of the average change in prices paid by consumers for a basket of goods and services over time. It is calculated by tracking the prices of a representative sample of consumer goods and services, and averaging their price changes for a given period.

Key Points about CPI

  • The CPI measures the monthly change in prices paid by consumers for a fixed basket of goods and services representative of aggregate consumer spending.
  • It is calculated as a weighted average of prices for this basket, with weights reflecting their relative importance in consumer expenditure.
  • The basket of goods and services is updated periodically to reflect changes in consumer spending habits.
  • The CPI is one of the most widely used measures of inflation, closely monitored by policymakers, financial markets, businesses, and consumers.
  • It is used to adjust wages, social security benefits, tax brackets, and other payments to account for the effects of inflation.
  • The CPI is not a perfect measure of the cost of living, as it does not account for changes in consumer behavior or substitutions in response to price changes. However, it provides a useful estimate of inflation over time.

The CPI is typically calculated by a government institution that is separate from the Central Bank, like the National Office of Statistics.

Sources:
CPI - Inflation (takes you to an OECD website)
Consumer Price Index (takes you to Wikipedia)
Consumer Price Index (takes you to Investopedia)