Glossary

Consumer Price Index

The government's main measure of inflation, tracking price changes for a fixed basket of goods and services bought by urban consumers.

Also called: CPI, CPI-U, cost-of-living index

The Consumer Price Index (CPI) is a monthly index published by the Bureau of Labor Statistics that measures the average change in prices paid by urban consumers for a "basket" of goods and services, including food, housing, transportation, medical care and apparel. The most commonly cited version is the CPI for All Urban Consumers (CPI-U).

Surveyors collect prices from thousands of stores and online sources, and housing costs are estimated from rents and an owners' equivalent rent. The weights reflect how consumers divide spending, updated periodically. The percent change from the previous year is the headline inflation rate, and a version excluding food and energy is core inflation. Social Security benefits, tax brackets, and many contracts are adjusted using CPI measures.

Economists point out limitations: the index may overstate or understate the true cost of living because of substitution, quality changes and new products, and individuals have varied baskets. Critics sometimes allege manipulation, which statisticians reject, while many acknowledge methodological debate; a 1996 commission found that CPI overstated inflation at the time. The Federal Reserve prefers a related index, the PCE. Policymakers use CPI data in setting monetary policy.

Last reviewed November 8, 2026

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Related terms

Inflation A sustained increase in the general level of prices, reducing the purchasing power of money. Core inflation A measure of inflation that excludes volatile food and energy prices to show the underlying trend. Stagflation A combination of slow economic growth, high unemployment and rising prices at the same time. Monetary policy The actions of a central bank, such as setting interest rates, to influence money, credit and economic activity. Minimum wage The lowest hourly pay employers may legally offer, set by federal, state and local law.