Inflation words, in plain language

Annual average

The mean of a year’s 12 monthly index levels. Used to compare whole years.

Annualized rate

The steady yearly rate that produces a total change over several years: (end ÷ start)^(1/years) − 1.

Base period

The period in which an index equals 100. Canada’s CPI uses the 2002 average (2002=100).

Basket

The fixed set of goods and services whose prices the CPI tracks, weighted by how much households spend on each.

Consumer Price Index (CPI)

Statistics Canada’s monthly measure of the change in prices paid by consumers for a fixed basket of goods and services.

Core inflation

Measures that remove volatile price movements to show the underlying trend. The Bank of Canada’s preferred measures are CPI-trim and CPI-median.

CPI-common

A Bank of Canada core measure that tracks price changes common to the categories in the CPI basket.

CPI-median

A Bank of Canada core measure: the price change at the 50th percentile of the weighted distribution of component price changes each month.

CPI-trim

A Bank of Canada core measure that excludes the components with the most extreme price changes each month (the top and bottom 20% by weight).

Deflation

A fall in the general price level. Canada’s annual average CPI last fell in 1953.

Disinflation

Inflation that is still positive but slowing, such as a move from 4% to 2%.

Inflation

A rise in the general level of prices, usually measured as the percentage change in the CPI over 12 months.

Inflation-control target

The Bank of Canada and the Government of Canada’s agreed goal of keeping CPI inflation at 2%, the midpoint of a 1% to 3% range, over the medium term.

Mortgage interest cost

A CPI component within owned accommodation that tracks the interest homeowners pay on their mortgages. It rises when interest rates rise.

Nominal

Measured in the dollars of the time, without adjusting for inflation.

Policy interest rate

The Bank of Canada’s target for the overnight rate, the interest rate it wants to see for overnight loans between financial institutions.

Purchasing power

How much a fixed amount of money can buy. It falls as prices rise.

Real

Adjusted for inflation, so amounts from different times can be compared in the same dollars.

Real wage

Earnings adjusted for inflation: (1 + wage growth) ÷ (1 + CPI growth) − 1.

Seasonally adjusted

Data with regular seasonal patterns removed. The CPI on this site is not seasonally adjusted; the 12-month change largely removes seasonal effects.

Shelter

The CPI component covering rent, owned accommodation (including mortgage interest cost) and water, fuel and electricity.

Table and vector

Statistics Canada publishes data in numbered tables (such as 18-10-0004-01); each individual series in a table has a vector number (such as v41690973, the monthly all-items CPI for Canada).

12-month change

The percentage change from the same month a year earlier. The headline inflation rate.

Definitions follow Statistics Canada and Bank of Canada usage. See how it works for sources.