CPI stands for Consumer Price Index. It is a measure of the average change in prices over time for a basket of goods and services consumed by households. Essentially, it is used to track inflation and changes in the cost of living. It is calculated by comparing the prices of a fixed basket of goods and services in a base year to the prices of the same basket in a later year, and expressing the result as a percentage change.
A lower CPI is generally considered better, as it indicates that prices are not rising as quickly and that there is less inflation. Inflation, or a sustained increase in the overall price level of goods and services in an economy, can lead to a decrease in purchasing power for consumers, making it more difficult for them to afford basic necessities. Central banks and governments often try to maintain a low and stable rate of inflation in order to promote economic growth and stability.
However, having a very low CPI (i.e. deflation) can also be detrimental to the economy, as it can lead to a decrease in economic activity and make it more difficult for companies and individuals to repay debt.
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