Consumer Price Index

The Consumer Price Index (CPI) is a measure of the weighted average of the prices of a specific set or basket of consumer goods and services purchased by households for their day-to-day living needs. The CPI measures the rate of inflation for household consumption or, alternatively, changes in their cost of living.   A simple way to think of the CPI is to regard it as a measure of the cost of all goods and services purchased by consumers.  Consequently, changes in the prices of particular items will alter the overall “basket includes those goods and services, frequently purchased by consumers and represents an important part of their expenditure.  Therefore, it is necessary to update the basket periodically to ensure that the index continues to be relevant.