What is the EU CPI?

The EU CPI abbreviation means the European Union Index of Consumer Price. It is a tool used to measure inflation and monitor changes in price for common items purchased by households in the European Union. As inflation rises, one euro buys less because of higher prices for goods and services. When inflation drops, the euro can buy more because of lower prices for goods and services. The EU, expressed as a percentage, EU CPI indicates how many prices have risen or dropped for the previous month or the previous year.

for calculating EU CPI, representative list of common goods and services such as food, services, entertainment, health care costs and fuel. These items are commonly called a "consumer basket" or simply "basket", they represent routine daily and monthly expenses for a typical household. The cost of the consumer basket is calculated and compared with the previous month or the previous year.

For example, if the previous Bohar X and the current year is year y, year x is used as measurement foundationIt illustrates a change in prices and a year. After calculating current prices for consumer baskets, analysts hypothetically determine the EU CPI per year 104%. Such numbers show that prices have increased by 4% since X. Similar calculations are used for monthly CPI data, while the previous month serves as basic measurements and prices of the current month determining the percentage of change.

monitoring changes in consumer prices helps manage monetary policy, to determine changes in living standards, and help banks determine interest rates. Low CPI calculations lead to lower interest rates, while high CPI tends to cause interest rates to increase. Banks are changing interest rates based on EU CPI in an effort to alleviate inflation and support economic growth in the European Union.

Another component to understand the EU CPI discussion is a harmonized price index (hicp.) Since the European Union is composed of several countries, it is necessary to "harmonize" the articles on average or to "harmonize"Stikes in several independent economies. Inflation pressure in one country may not be the same in another. Using HicP, the European Central Bank can assess the inflation rate for the entire euro area.

In addition to the standard EU CPI and hicp used by banks, some analysts also use basic CPI. Core CPI removes some volatile products from the basket of consumers, such as fuel and food that can create an unusually high or otherwise distorted view of the EU CPI. According to some analysts, certain events such as a natural disaster or lack of fuel may cause inflation pressure to occur higher due to unusual, temporary increase in prices for affected goods.