Economics
What is Inflation (CPI)?
Inflation measures the rate at which prices of goods and services rise over time, eroding purchasing power, tracked by the Consumer Price Index (CPI) in the US (BLS) and in India (MOSPI).
Formula
Inflation Rate = (CPI_current - CPI_previous) ÷ CPI_previous × 100
How to Interpret
Moderate inflation (2–6%) is healthy. High inflation erodes real returns and forces central banks to raise rates, which hurts stock valuations. The Fed and RBI both react to CPI prints, surprise readings move bond yields and equities sharply.
Typical Ranges
US Federal Reserve target: 2% (uses Core PCE as primary gauge). Or international markets like India: RBI target 4% ± 2%. Above target triggers policy tightening in both regions.