The consumer-price index (CPI) is a key measure of inflation, tracking changes in the cost of a fixed basket of goods and services. The Bureau of Labor Statistics constructs the CPI by surveying households and businesses to determine spending patterns, then weighting items like food, energy, housing, and healthcare accordingly. This index is updated periodically to reflect evolving consumption habits.

Economists also study other indicators to gauge inflation. The personal consumption expenditures (PCE) price index, preferred by the Federal Reserve, covers a broader range of goods and adjusts for substitution. The producer price index (PPI) measures wholesale cost changes. Together, these indicators help analysts understand underlying price trends and separate temporary shocks from persistent inflation.

A critical number for markets and policy is the 2% inflation target set by the Federal Reserve. When CPI or PCE readings deviate from this goal, central bankers may adjust interest rates. Comparing the CPI with other metrics, such as core inflation (excluding food and energy), provides a clearer view of long-term price dynamics. Understanding how these indexes are compiled and interpreted is essential for grasping economic forecasts and investment strategies.