Consumer Price Index (CPI) Formula
Calculate CPI using (Cost of basket in current year / Cost in base year) × 100.
Tracks inflation and changes in purchasing power over time with worked examples.
Need to calculate, not just reference? Use the interactive version.
Open Consumer Price Index (CPI) Calculator →
The Formula
CPI = (Cost of Basket in Current Year / Cost of Basket in Base Year) × 100
The Consumer Price Index tracks how the price of a fixed basket of goods changes over time. A CPI of 100 means prices are at the base year level. Above 100 means prices have risen.
Variables
| Symbol | Meaning |
|---|---|
| CPI | Consumer Price Index (unitless number) |
| Current Basket | Total cost of the standard basket of goods today |
| Base Basket | Total cost of the same basket in the base year |
Example 1
A basket cost $400 in the base year and $460 today
CPI = (460 / 400) × 100
CPI = 115 (prices have risen 15% since the base year)
Example 2
The CPI is 180. What does a $50 base-year item cost now?
Current price = Base price × (CPI / 100)
Current price = 50 × (180 / 100)
Current price = $90
When to Use It
Use the CPI formula when:
- Tracking changes in the cost of living over time
- Adjusting salaries or Social Security payments for inflation
- Comparing purchasing power between different years
- Setting monetary policy and interest rates
Key Notes
- The fixed basket is updated periodically but can lag current spending patterns — new categories (streaming, ride-sharing) may be underweighted, causing CPI to overstate or understate real-world inflation for specific groups
- To adjust a past salary for inflation: real value = nominal value × (CPI_current / CPI_base) — this converts any dollar amount to its equivalent purchasing power in a reference year
- Core CPI excludes food and energy (which fluctuate seasonally) to show underlying long-term inflation trends; headline CPI includes everything and is used for Social Security adjustments
- CPI reflects an "average" household basket — retirees (higher healthcare spending) and young families (higher housing spending) may experience personal inflation rates that differ significantly from the published CPI