The economy
Consumer price index
Also called CPI
The main official measure of inflation, tracking the price of a fixed basket of goods and services.
How it works
Statistical agencies price a representative basket each month and report how much it has changed. The basket is reweighted periodically to reflect what people actually buy.
Core CPI strips out food and energy, which are volatile for reasons unconnected to underlying inflation. Central banks watch the core measure more closely for that reason.
Where it misleads people
CPI is an average across a whole population. Your personal inflation rate depends on your own spending, and for anyone with large rent, childcare or education costs it is routinely higher than the headline.
Related terms
- InflationThe rate at which prices rise, which means the rate at which each pound or dollar buys less.
- Core inflationInflation excluding food and energy prices, used to see the underlying trend.
- Central bankThe institution that sets a country’s benchmark interest rate and manages its money supply.
- Purchasing powerWhat your money can actually buy, rather than how many units of currency you have.
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