1. What is CPI Inflation?

The Consumer Price Index (CPI) measures the average change in prices paid by consumers for goods and services over time. The inflation rate calculated from CPI shows how much prices have increased from one period to another.

2. How Does the Calculator Work?

The calculator uses the CPI inflation formula:

Where:

• \( \text{CPI}_{\text{current}} \) — Current period CPI value
• \( \text{CPI}_{\text{previous}} \) — Previous period CPI value

Explanation: The formula calculates the percentage change in price level from the previous period to the current period.

3. Importance of Inflation Calculation

Details: CPI inflation is a key economic indicator used by governments, central banks, and businesses to make policy decisions, adjust wages, and evaluate economic performance.

4. Using the Calculator

Tips: Enter both current and previous CPI index values. The values must be positive numbers representing the Consumer Price Index for two different time periods.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between CPI and inflation?
A: CPI is the index number, while inflation is the percentage change in CPI over time.

Q2: How often is CPI calculated?
A: In most countries, CPI is calculated monthly and published with a short lag.

Q3: What does a negative inflation rate mean?
A: Negative inflation (deflation) means prices are decreasing overall.

Q4: What's considered a "normal" inflation rate?
A: Most central banks target around 2% annual inflation as healthy for economic growth.

Q5: Why use CPI instead of other inflation measures?
A: CPI focuses on consumer goods and services, making it most relevant for household purchasing power.