verðvísitölunnar

Verðvísitalan, often translated as the Consumer Price Index (CPI) in English, is a statistical measure that tracks the average change over time in the prices of a basket of goods and services purchased by households. Its primary purpose is to gauge inflation or deflation within an economy.

The basket of goods and services included in the calculation is determined through regular surveys of household expenditure patterns. This basket typically encompasses a wide range of items such as food, housing, transportation, clothing, healthcare, and recreation. The prices of these items are collected at regular intervals, usually monthly, from various retail outlets and service providers.

The calculation involves weighting each item in the basket according to its relative importance in the overall household budget. For example, housing costs, which represent a significant portion of household spending, will have a higher weight than items like entertainment. The index is then computed by comparing the current cost of this basket to its cost in a base period, which is assigned a value of 100.

Changes in the verðvísitalan are used to measure inflation rates. A positive change indicates inflation, meaning the general price level has increased, while a negative change signifies deflation, where prices have fallen. Central banks and governments often use the CPI as a key indicator for monetary policy decisions, such as adjusting interest rates, and for setting economic targets. It also serves as a basis for adjusting wages, pensions, and other contractual payments to maintain their purchasing power.