Deposit Glossary
Consumer Price Index (CPI)
A practical explanation of Consumer Price Index (CPI), including what it means, how it is used, and why it matters in real savings decisions.
Definition
CPI is an important indicator of changes in the price level of consumer goods and services, and is often used to observe the strength of inflation. For savers, the CPI can help determine whether deposit yields are actually outperforming price rises.
? Why Should You Understand Consumer Price Index (CPI)？
Many people only look at the periodic interest rate, but ignore the changes in purchasing power. If you look at the deposit rate and CPI together, you can get closer to the real return judgment.
Key Points for Understanding This Term
- When the CPI rises, the real gains from low-interest deposits will be significantly eroded.
- When comparing the effect of long-term savings, CPI has more reference value than the nominal interest rate alone.
- CPI is not a bank rate, but it affects your judgment on deposit allocation.
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