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consumer price index

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

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