Thinking Of The Price Index Of China's Inflation And Improvements

Among all the price indexes for measuring inflation, consumer price index (CPI) reflects the price of a basket of goods and services, and is the most important and popular price index all over the world. CPI is not only a significant index for making macroeconomic policy but also a criterion for justifying fiscal and monetary policies.There is a series of problems about CPI in China, which make it unable to depict the inflation in China accurately. The paper makes two suggestions to improve CPI in China:First, use a different method and data to calculate housing cost;Second, compile CPI for consumers at different income levels.Although CPI has a lot of merits in measuring inflation, it still has certain drawbacks. Based on the CPI, this paper tries to work out a price index involving assets prices and introduces core inflation. When making monetary policies, the central bank should not only focus on the CPI but also consider other price indexes.