Finance · Glossary
What is CPI (Consumer Price Index)?
Quick definition
A measure of the average change in prices paid by consumers for a basket of goods and services. The main inflation gauge.
Full explanation
CPI (Consumer Price Index) is published monthly by government statistical agencies (BLS in the US, Eurostat in the EU, INEGI in Mexico). It tracks prices of a "basket" of goods: housing, food, transportation, medical care, etc. CPI is the most widely used inflation measure. CPI-W (Urban Wage Earners) and CPI-U (All Urban Consumers) are common variants. "Core CPI" excludes volatile food and energy prices. Year-over-year CPI change is the headline inflation number. Central banks target CPI around 2% annually. Social Security benefits, tax brackets, and many contracts are indexed to CPI. CPI has limitations — it does not always reflect individual spending patterns.
Related calculators
Calculators that use or explain CPI.
Related terms
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APR (Annual Percentage Rate)
The yearly cost of a loan, expressed as a percentage, including most fees. Used when borrowing money.
APY (Annual Percentage Yield)
The yearly return on a deposit or investment, including the effect of compounding. Used when saving money.
Compound Interest
Interest calculated on the initial principal AND on the accumulated interest from previous periods. The engine of long-term wealth.
Simple Interest
Interest calculated only on the original principal, not on accumulated interest. Used in short-term and consumer loans.
Principal
The original sum of money borrowed or invested, not including interest. The base on which interest is calculated.
Amortization
Spreading loan payments over time so each payment covers both principal and interest, with the loan fully paid off at the end.
Last reviewed: June 15, 2026 • Category: Finance