Inflation from the macro perspective

INFLATION is a gauge of cost of living over time. Officially, the Department of Statistics captures inflation through the Consumer Price Index (CPI) by tracking the price level changes of a fixed basket of goods and services in the domestic economy.

Unfortunately, CPI has often been questioned on how accurately it reflects the cost of living as felt by consumers. In reality, the index is an aggregate of price levels from urban areas to rural districts in Sabah and Sarawak. Therefore, the CPI acts better as a gauge of the direction of price pressures as opposed to the actual magnitude of price changes.