Is there a difference between the consumer price index and the inflation rate?

The consumer price index (CPI) and the inflation rate are closely related but have some key differences.

The CPI is an index that measures the change over time in the prices paid by typical consumers for goods and services. It tracks the average prices of a basket of products meant to represent overall consumer spending.

The inflation rate is the percentage change in the CPI from one period to the next, most commonly from one year to the next. It represents the rate prices are rising over time.

The CPI shows the current level of prices, while the inflation rate expresses the rate of change in prices. The inflation rate is calculated by comparing the current CPI to the CPI from an earlier period.

The inflation rate is the most useful for understanding how quickly prices are rising and the declining purchasing power of money. If the CPI rises from 185 to 190 over 12 months, the inflation rate is (190-185)/185 = 0.027 or 2.7%.