What is the CPI?

The CPI (Consumer Price Index) is the official thermometer of inflation. It measures how much prices have risen (or fallen) in a given period. It is calculated by the national statistics office every month.

What it measures

The CPI tracks the prices of a “basket” of products and services that families consume:

  • Food (rice, beans, meat)
  • Housing (rent, energy, water)
  • Transportation (gasoline, bus)
  • Health (health plan, medicines)
  • Education (school tuition)

Why the CPI matters to you

  1. Your money loses value: if the CPI is 5% per year, $20 today will be worth $19 in a year
  2. Investments: returns below the CPI mean you’re losing money
  3. central bank base rate: the Central Bank raises or lowers the base rate to control the CPI
  4. Adjustments: rents, health plans, and salaries are adjusted by the CPI

CPI and investments

For your money to really grow, your investments need to yield above the CPI. That’s why there are securities like inflation-linked government bonds, which guarantee real returns (above inflation).

CPI history

  • 2020: 4.52%
  • 2021: 10.06%
  • 2022: 5.79%
  • 2023: 4.62%
  • 2024: ~4.5%