The Consumer Price Index, or CPI, measures changes in prices paid for consumer goods and services. Each series has a defined population, geographical coverage, period and calculation method. Its percentage change is a measure of consumer-price inflation.
A CPI level is an index number, not a currency amount or an inflation rate by itself. Comparing levels in the same series reveals the change over time.
How are prices and spending combined?
The US Bureau of Labor Statistics describes CPI as a weighted measure based on consumer spending and sampled prices. The US CPI-U concerns urban consumers; it is not a measurement of one randomly chosen person’s budget.
Different categories receive weights reflecting their importance in spending. Price collection also addresses replacement products, quantity and quality changes. Actual index methods involve more than averaging every price equally.
The ONS methodology identifies the coverage and construction of UK consumer-price measures. Country-specific methods matter. A household spending unusually heavily on a particular category may experience inflation differently from the published average.
How is the inflation rate calculated?
Using the BLS percentage-change method, suppose the same fictional index rises from 150 to 165 over a year. The calculation is (165 − 150) ÷ 150 × 100 = 10%.
The increase is 15 index points, but 10%, because the change is divided by the earlier level of 150. Both figures must use the same series and reference base.
An annual comparison, monthly comparison and annual-average comparison use different periods. Seasonal adjustment also affects which figures are suitable for a particular comparison.
Can CPI tell us an individual product’s price?
No. A 10% rise in an all-items index does not establish that a particular loaf, rent payment or bus fare rose by 10%. Some prices may rise faster, stay unchanged or fall.
Multiplying an earlier money amount by the ratio of CPI levels can express it in broadly comparable purchasing-power terms. It does not reconstruct an individual product’s actual selling price. Our inflation explainer distinguishes price levels from inflation rates.
How do the UK measures differ?
UK CPIH adds owner-occupiers’ housing costs and Council Tax to CPI. The ONS continues to publish RPI as a legacy measure, without accredited official statistic status.
The Bank of England’s remit changed to a 2% CPI target in December 2003. That change predates RPI’s loss of National Statistics status in 2013; the two events should not be conflated.
What does an index-linked adjustment require?
BLS guidance on escalation agreements stresses identifying the exact index and comparison terms. Population, area, item coverage, adjustment status and timing affect the result. A news headline’s inflation rate may not match the series specified in a contract.
Last checked and updated on November 3, 2026 by the MBN editorial team.