What Is the Connection Between Inflation and CPI?

The inflation rate (Inflation), also known as the rate of change of prices ^[1] , is the ratio of the oversupply of money to the actual amount of money required to reflect the degree of inflation and currency depreciation.

Inflation rate

The inflation rate is calculated by the growth rate of the price index, and the price index can use the consumer price index (

1.Distinguish according to the rate of price rise

Creeping Inflation (Annual price increase within 1% to 3%)

Moderate inflation is characterized by prices that rise slowly and predictably (an annual increase in prices between 3% and 6%)

Severe inflation (6% to 9% increase in prices each year)

Dashing Inflation (Annual price increase rate is below 10% to 50%)

Hyperinflation (prices rise by more than 50% per year)

2. Differentiate according to people's expectations

Unexpected inflation

Expected inflation

3. Differentiate according to the impact on prices

Balanced inflation (price of each commodity rises by the same percentage)

Unbalanced inflation (prices of various commodities are not rising at exactly the same rate)

4. Distinguish according to different expressions

Open inflation

Causes redistribution of income and wealth, distorts commodities

Inflation rate = (current period

(I) Producer Price Index (PPI)

Producer Price Index (Producer Price Index) is a price index that measures how manufacturers and farmers sell goods to stores. It mainly reflects the price changes of the means of production, and is used to measure the cost and price changes of various commodities at different production stages.

(2) Consumer Price Index (CPI)

The Consumer Price Index is a measure of the price of a fixed consumer goods basket. It mainly reflects the price changes of consumers paying for goods and services. It is also a tool for measuring the level of inflation. It is expressed in percentage change. .

(3) Retail Price Index (RPI)

The Retail Price Index refers to the price index of retail goods paid in cash or credit card. The US Department of Commerce conducts a nationwide sample survey of retail goods every month, including furniture, appliances, supermarket sales, medicine, etc., but the consumption of various service industries is not included. Automobile sales constitute the largest single component of retail sales, accounting for approximately 25% of the total.

Many analysts of the foreign exchange market place great emphasis on examining changes in the retail price index. Socio-economic development is rapid, and increased personal consumption will lead to rising retail prices. The continuous rise of this indicator will likely bring upward pressure on inflation, make the government tighten money supply, and interest rates tend to increase the country's currency. stand by. Therefore, the index is positive and theoretically better than the country's currency. ^[2]