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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Consumer Price Index

Definition:

Recap: inflation is why a basket of household goods might cost $40 today when ten years ago the same basket cost $20. So how can we measure inflation? With that same basket of stuff.

Experts take a basket of basic household products and services and tally up the prices every so often, comparing them to the price of the same stuff months or years ago. This lets them track what’s going with inflation, so you know how quickly the value of your dollar is dropping.

Thanks, guys—we needed more bad news.

P.S. Note that the CPI number does not include energy or food. Like people don’t spend a lot of their income on those things? The thinking is that gas and food are just too volatile and are seen to cloud the "real" inflation numbers.