Definition
The government's main inflation gauge: it tracks the price of a broad basket of goods and services (housing, food, transportation, medical care) over time. The percentage change in CPI is what headlines call the inflation rate.
Why it matters
CPI quietly reprices your whole life: Social Security cost-of-living adjustments, inflation-protected bonds, many leases, and wage talks all key off it. If your pay rises slower than CPI, you took a real-terms pay cut, whatever the nominal number says.
Example
If a basket costing $100 last year costs $103 today, CPI inflation was 3%. A worker whose salary rose 2% that year lost about 1% of purchasing power even though the paycheck grew.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.