High CPI (Consumer Price Index), which reflects inflation, is generally considered bad.
Why High CPI is Bad
When the CPI increases significantly, it indicates a rise in the cost of living. This can lead to several negative consequences:
- Decreased Purchasing Power: As stated in the provided reference, when the CPI increases, the cost of living also increases. If wages don't increase at the same rate as the CPI, individuals can buy less with the same amount of money.
- Erosion of Savings: High inflation erodes the real value of savings over time. The money saved today may not have the same purchasing power in the future if inflation is high.
- Economic Hardship: With the passage of time, inflation could lead to economic hardship since you can't buy as much with your money as before. This is especially true for individuals on fixed incomes, such as retirees.
The Impact of High CPI
To illustrate the impact, consider the following scenario:
| Item | Price Before Inflation | Price After Inflation (High CPI) |
|---|---|---|
| Loaf of Bread | \$2.00 | \$3.00 |
| Gallon of Milk | \$3.50 | \$5.00 |
In this scenario, if your income remains the same, you are now spending more on basic necessities, leaving less money for other expenses or savings.
