What is CPI – Consumer Price Index?

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What is CPI – Consumer Price Index?

CPI stands for Consumer Price Index, it is a monthly report which looks at the purchasing power. It measures the rise of the price of a basket of goods and services. This gives an insight into current inflation levels and economic growth, this means it is a good indicator of potential interest rate changes.
When CPI rises this means goods and services are now more expensive meaning the same goods before now cost more. Rising CPI causes inflation which if increases to rapidly can cause harm to an economy. This is why central banks look at CPI to make decisions including interest rate changes. If CPI reports higher then expected, this could mean possible inflation worries that could lead to interest rate hikes to combat the inflation, which raises the demand for that currency.

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Consumer price index – relation to currency price

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