Which two indexes are primarily used to assess inflation rates?

The Consumer Price Index (CPI) and the Producer Price Index (PPI) are both essential tools for assessing inflation rates in an economy. The CPI measures the average change over time in the prices paid by consumers for a basket of goods and services, which directly reflects the purchasing power of consumers and changes in living costs. It provides crucial insight into consumer inflation, depicting how price fluctuations affect everyday households.

On the other hand, the PPI measures the average change over time in the selling prices received by domestic producers for their output. The PPI focuses on the wholesale level and serves as a leading indicator of consumer price inflation, as changes in producer prices can eventually pass through to consumers.

Together, these two indices give a comprehensive view of inflation from different perspectives—one from the consumer's viewpoint and the other from the producer's side. This dual approach is essential in economic analysis, as it helps policymakers, economists, and analysts understand inflation dynamics and make informed decisions.