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Consumer price indexes (CPIs) are index numbers that measure changes in the prices of goods and services purchased or otherwise acquired by households, which households use directly, or indirectly, to satisfy their own needs and wants. In practice, most CPIs are calculated as weighted averages of the percentage price changes for a speciﬁed set, or ‘‘basket’’, of consumer products, the weights reﬂecting their relative importance in household consumption in some period. CPIs are widely used to index pensions and social security benefits. CPIs are also used to index other payments, such as interest payments or rents, or the prices of bonds. CPIs are also commonly used as a proxy for the general rate of inﬂation, even though they measure only consumer inﬂation. They are used by some governments or central banks to set inﬂation targets for purposes of monetary policy. The price data collected for CPI purposes can also be used to compile other indices, such as the price indices used to deﬂate household consumption expenditures in national accounts, or the purchasing power parities used to compare real levels of consumption in different countries.
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