A measure of the average price level of a basket of goods and services purchased by the consumers – a measure of inflation.
Increases in consumer prices represent the inflationary pressures surrounding the economy. The CPI figure is a main indicator of inflation that central banks monitor closely. Consumers buy goods and use services and the changes they experience in prices will reflect the inflation in the economy. For example, lets say data released indicated 0.5% increase in CPI. $100 worth of goods and services since last CPI release is now $100.50. Core CPI excludes the volatile food and energy component. Higher inflation usually causes the monetary policy makers to become more hawkish – a rate hike stance.
Central banks have inflation targets that they are comfortable with. 2% is a common benchmark, but this changes slightly also from time to time.
