Consumer Price Index

The consumer price index is best thought of as, literally, a basket of everyday things that you can buy and services that you can pay to use. The price index assigns a “weighting” to each item in the basket based on its perceived importance to the typical person (so basic expenses like food are usually weighted quite heavily). The total cost of the basket is tracked over time and the change is used to measure how much prices are rising in an economy – it’s one major measure of the economy’s inflation rate.