<p>The Consumer Price Index (CPI) is a statistical measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by comparing the current cost of the basket with its cost in a base period, typically set at 100.</p>
<p><strong>Why it matters:</strong> CPI is a key indicator of <a href="/NewSite/encyclopedia/inflation/" class="ency-link">inflation</a>, which influences monetary policy. Central banks, like the Federal Reserve, use CPI to set interest rates. For instance, a high CPI might prompt the Fed to raise interest rates to cool down the economy and control inflation.</p>