The Consumer Price Index (English: Consumer Price Index, abbreviation: CPI) is called the Consumer Price Index in Mainland China, the Comprehensive Consumer Price Index in Hong Kong, and the Consumer Price Index in Taiwan. In economics, it reflects the The index of price changes based on the statistics of the prices of life-related products and services is expressed in percentage changes. It is one of the main indicators to measure inflation.

Consumer Price Index

The Consumer Price Index (Consumer Price Index) is a measurement of the price of a fixed basket of consumer goods. It mainly reflects the changes in the prices of goods and services paid by consumers. It is also a tool to measure the level of inflation, expressed in percentage changes. . The main commodities that constitute this indicator in the United States are divided into seven categories, including: food, wine and beverages, housing; clothing; transportation; medicine and health; entertainment; and other commodities and services. In the United States, the consumer price index is published monthly by the Bureau of Labor Statistics, and there are two different consumer price indexes. One is the Consumer Price Index of Workers and Staff, or CPW for short. The second is the Consumer Price Index for urban consumers, referred to as CPIU.

CPI importance

Very high: The Consumer Price Index (CPI) is a popular economic indicator in the financial market. The consumer price index determines how much consumers spend to purchase goods and services, and influences the cost of business operations. Moreover, the consumer price index affects the formulation of government fiscal and financial policies.

The CPI price index indicator is very important and enlightening. It must be carefully grasped, because sometimes it is announced that the indicator has risen and the currency exchange rate is improving, and sometimes the opposite is true. Because the level of the consumer price index indicates the purchasing power of consumers and also reflects the economic situation, if the index falls, it reflects the economic recession, which is bound to be detrimental to the currency exchange rate trend. But if the consumer price index rises, will the exchange rate be positive? Not necessarily, it depends on the “increase” of the consumer price index. If the index rises moderately, it means that the economy is stable and upward, which is of course beneficial to the country’s currency, but if the index rises too much, it will have an adverse effect, because the price index is inversely proportional to the purchasing power. The more expensive the price, the lower the purchasing power of the currency , It is bound to be detrimental to the country’s currency. If you consider the impact on interest rates, the impact of this indicator on foreign exchange rates is more complicated. When a country’s consumer price index rises, it indicates that the country’s inflation rate has risen, that is, the purchasing power of the currency has weakened. According to the purchasing power parity theory, the country’s currency should weaken. On the contrary, when a country’s consumer price index falls, it indicates that the country’s inflation rate has fallen, that is, the purchasing power of the currency has risen. According to the purchasing power parity theory, the country’s currency should strengthen. However, since every country takes the control of inflation as its primary task, rising inflation will also bring opportunities for interest rates to rise, and therefore, it is beneficial to the currency. If the inflation rate is controlled and falls, interest rates will also tend to fall, which will adversely affect the currencies of the region. Policies to reduce the inflation rate will lead to the “tequila effect”, which is a common phenomenon in Latin American countries.