The Consumer Price Index (CPI) is a measure of inflation that tracks the average change in prices over time that people pay for everyday goods and services.

 

Think of it as a way to see if things like groceries, gas, rent, or movie tickets are getting more expensive, staying the same, or getting cheaper. The U.S. Bureau of Labor Statistics (BLS) calculates the CPI by looking at the prices of a "basket" of commonly purchased items to represent what the average person spends money on.

 

For example, the CPI includes things like milk, bread, clothing, cars, housing, medical care, and entertainment. By comparing the cost of this basket over time, the CPI shows whether the general level of prices is rising (inflation), falling (deflation), or holding steady.

​

The CPI is important because it tells us how much the cost of living is changing. When prices rise (inflation), it can mean that people need to spend more money to buy the same things. This is especially hard on families or individuals with tight budgets because their money doesn’t stretch as far. If prices fall too much (deflation), it can be a sign of economic problems, like businesses struggling to sell goods.