CPI stands for Consumer Price Index. It is a measure of inflation that tracks the changes in the prices of a basket of goods and services that are typically purchased by households. The CPI is calculated by collecting price data for various goods and services, such as food, housing, transportation, medical care, and entertainment, and then calculating the percentage change in the average price of these items over time.
The CPI is an important economic indicator as it helps to assess changes in the cost of living for consumers. Governments, businesses, and individuals use CPI data to adjust wages, contracts, and prices to maintain purchasing power and to make informed economic decisions. The CPI is also used by policymakers to formulate monetary and fiscal policies, such as setting interest rates and adjusting tax rates, to manage inflation and promote economic growth.