The Consumer Price Index (CPI) is a measure of the average change in prices paid by consumers for a basket of goods and services over time. In simpler terms, it tracks how expensive it is to buy everyday things like groceries, transportation, housing, and clothing.

What is CPI?

• The CPI is calculated by the government (usually the Bureau of Labor Statistics) based on surveys of consumer spending habits.
• The basket of goods and services tracked by the CPI is updated regularly to reflect changes in consumer preferences.
• The CPI is expressed as a percentage change from a base year. For example, if the CPI for 2023 is 110, it means that the average price of goods and services has increased by 10% since the base year.

Why is CPI important?

• The CPI is a key indicator of inflation.
• It helps policymakers make informed decisions about monetary and fiscal policy.
• It helps businesses adjust their prices and wages.
• It helps consumers understand how their purchasing power is changing over time.

How does CPI relate to Web3?

• While not directly related to Web3, understanding inflation can be helpful for web3 enthusiasts as it affects the purchasing power of their crypto holdings.
• If inflation is high, the value of cryptocurrencies can go down in real terms, meaning that you can buy fewer goods and services with the same amount of crypto.
• Conversely, if inflation is low or negative (deflation), the value of cryptocurrencies can go up in real terms, meaning that you can buy more goods and services with the same amount of crypto.