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Lesson 26

Measuring Inflation

A consumer price index combines prices with expenditure weights and a stated base. Monthly inflation compares with the preceding month; year-on-year compares with the same month a year earlier; average annual inflation compares two twelve-month averages.
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Sahmino editorial· 6 September· 2 min read· General

A consumer price index combines prices with expenditure weights and a stated base. Monthly inflation compares with the preceding month; year-on-year compares with the same month a year earlier; average annual inflation compares two twelve-month averages. These rates answer different questions. Statistical agencies can differ in population, geography, basket, base and revision practice. For Iranian releases, retain the named institution and the publication date; a foreign CPI definition explains the method, not the latest Iranian figure.

Worked example (hypothetical)

This month’s index is 220, last month’s 200 and the same month last year 160. Monthly inflation is 10%; year-on-year is 37.5%. Average annual inflation cannot be calculated from those three observations alone.

Check your understanding

Can lower inflation accompany higher prices? Yes. Prices can still rise, just at a slower rate. A falling rate is not necessarily a falling price level.

Sahmino AcademyEconomyInflation

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