Business, Legal & Accounting Glossary
A Consumer Price Index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.
CPI is the common abbreviation for the Consumer Price Index, which measures the change in prices urban Americans pay for a fixed basket of goods and services. The CPI encompasses over 80,000 consumer items in a wide range of categories, like apparel, medical care, and transportation. Besides the overall “headline” CPI, a “core” CPI is computed that excludes the somewhat volatile food and energy sectors. The CPI is among the key indicators that the Federal Reserve Board monitors for signs of inflation, so the CPI can offer clues about the direction of interest rates. A larger-than-expected increase in the CPI tends to have a negative effect on stock prices, because it raises fears that the Fed will tighten monetary policy and slow the economy. The CPI itself has an impact on price levels, because it is used to adjust payments to individuals, such as cost-of-living wage adjustments. The CPI is compiled by the Bureau of Labor Statistics within the Department of Labor, which releases the report on or about the 15th of each month at 8:30 AM.
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This glossary post was last updated: 9th February, 2020 | 2 Views.