The Consumer Price Index (CPI ) is a measure of the average change in prices
over time in a market basket of goods and services.
The CPI is a price index that tracks the prices of a
specified basket of consumer goods and services, providing a measure of
inflation. The CPI is a fixed quantity price index and considered a
cost-of-living index. It is also known as the Retail
Price Index in the UK.
The CPI can be used to track changes in prices of goods and services
purchased for consumption by households, i.e., of the consumer basket. User fees
(such as water and sewer service) and sales and excise taxes paid by the
consumer are also included. Income taxes and investment items (such as stocks,
bonds, life insurance, and homes) are not included.
The core CPI index excludes goods with high price volatility, such as food
and energy. This measure of core inflation systematically excludes food and
energy prices because, historically, they have been highly volatile. More
specifically, food and energy prices are widely thought to be subject to large
changes that often fail to persist and frequently represent relative price
changes. In many instances, large movements in food and energy prices arise
because of supply disruptions such as drought or OPEC-led cutbacks in
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