The consumer price index (CPI) measures the weighted average cost of basic goods and services. This includes everyday essentials such as food, clothing, and healthcare. Also, the CPI calculates the average prices of a basket of consumer goods and services to assess the relative cost of living and the impact of various price changes. Accordingly, it is one of the most widely used measures for analyzing inflation and deflation. Plus, the CPI helps economists to understand the buying habits of consumers and determine gross domestic product (GDP).

In addition, the CPI helps investors to adjust returns calculations for inflation. However, this measure is somewhat controversial. Some economists believe that the CPI is an inappropriate measure for inflation. This is because of the lack of consensus around the CPI overstating or understating data.