Consumer Price Index (CPI)
A measure of the average change in prices paid by consumers for a basket of goods and services.
What is CPI?
The Consumer Price Index (CPI) measures the average price change over time for a fixed basket of goods and services purchased by urban consumers, including food, housing, apparel, transportation, healthcare, and recreation. Published monthly by the US Bureau of Labor Statistics, CPI is the most widely used measure of consumer inflation. It serves as the reference rate for Social Security cost-of-living adjustments, inflation-indexed Treasury bonds (TIPS), and countless wage and rent contracts. The CPI can be expressed as a level or as a year-over-year percentage change. The core CPI excludes volatile food and energy prices to show underlying inflation trends.
Example
In June 2022, the US CPI rose 9.1% year-over-year — the highest reading since 1981 — driven by surging energy and food prices in the aftermath of the COVID-19 pandemic and the Russia–Ukraine war. The Federal Reserve responded with aggressive interest rate hikes to bring inflation back toward its 2% target.