Quick Definition

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.

Formula

Examples

• 1When the CPI increases, it indicates rising inflation, prompting central banks to consider raising interest rates.
• 2A decrease in the CPI can signal deflation, potentially leading to lower interest rates.
• 3Businesses use CPI data to adjust salaries and product prices to maintain purchasing power.
• 4Investors monitor CPI trends to adjust their investment strategies, particularly in bonds and real estate.

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