“The consumer price index (CPI) measures the cost of living, and its growth rate measures inflation. Rising inflation often indicates strong demand for goods and services, and the Federal Reserve may respond by increasing the federal funds rate.

The CPI itself doesn’t affect consumers, but it is a measure of something that does: changes in the prices of goods and services that consumers are typically buying. For example, if the CPI grows by three percent from one year to the next, then average consumer prices have grown by the same amount. What this means for a single consumer depends on how much that consumer’s income has grown over the same time period. If the consumer’s income grew by only two percent, then consumer goods are more expensive relative to income for that consumer.

It’s a lot of work, but monitoring prices and deliberately shifting consumption toward goods and services with prices that have risen less than average can be helpful for avoiding some of the burdens of higher consumer prices in the short run. In the long run, inflation will ultimately affect all prices.”

Read in full: https://www.moneygeek.com/economics/terms/cpi/#expert=brian-jenkins