What is the consumer price index? How inflation is measured
By SendPay Business · · 2 min read
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The consumer price index, or CPI, tracks how the prices of everyday goods and services change over time. The yearly change in CPI is the headline inflation figure most people hear about.
How it works
- Statisticians pick a 'basket' of goods and services that households typically buy.
- They collect prices for those items every month.
- Each item is weighted by how much households spend on it.
- The change in the basket's total cost gives the inflation rate.
Headline and core
Headline CPI includes everything in the basket. Core measures usually leave out energy and food, whose prices swing a lot, to show the underlying trend. In the UK the figures are published monthly by the Office for National Statistics, and the Bank of England's inflation target is 2% on CPI.
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Why currencies move on CPI day
A higher-than-expected figure can make markets think interest rates will rise or stay high, which can lift the currency. A lower figure can do the opposite. The biggest moves happen when the number surprises.
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Questions people ask
What has inflation done to my money?
See future prices, what cash is worth today, and whether savings keep up.
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Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.