---
title: "Consumer Price Index Definition | Model Diplomat"
description: "The Consumer Price Index measures average price changes for a fixed basket of goods, crucial for understanding retail inflation trends."
url: "https://modeldiplomat.com/learn/glossary/consumer-price-index"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The Consumer Price Index measures the average change over time in prices paid by households for a fixed basket of goods and services, serving as the principal gauge of retail inflation.
- Which agency compiles the Consumer Price Index in India and what is its base year?
- How does CPI differ from the Wholesale Price Index (WPI)?
- What is the RBI's CPI inflation target under the flexible inflation-targeting framework?
- Does the US Federal Reserve target the CPI?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

The Consumer Price Index measures the average change over time in prices paid by households for a fixed basket of goods and services, serving as the principal gauge of retail inflation.

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In 2016 the Reserve Bank of India adopted CPI (Combined) as its inflation-targeting anchor, with the Monetary Policy Committee mandated to hold retail inflation at 4 percent within a 2–6 percent band.

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