In today’s dynamic economy, measuring and understanding changes in prices is crucial for various stakeholders, including policymakers, businesses, and consumers. One essential tool used for this purpose is the Consumer Price Index (CPI). The CPI provides a comprehensive overview of price movements in a basket of goods and services, enabling analysts to gauge inflation and make informed decisions. This article aims to explain what the CPI is and how it is used in practical applications. The Consumer Price Index (CPI) is a statistical measure that tracks the average price changes of a representative basket of goods and services over time. It measures inflation by comparing the current prices of items in the basket to their prices during a base period. The CPI covers a broad range of consumer goods, such as food, housing, transportation, healthcare, education, and entertainment, among others. It is typically expressed as an index number relative to a specific year, with that year’s index set to 100. The calculation of the CPI involves three main steps. First, a base period is established, which serves as the reference point for price comparisons. Second,