What is the relationship between CPI and interest rate?

The Consumer Price Index (CPI) measures inflation by tracking changes in the price level of a basket of goods and services over time. Generally, when CPI rises, indicating higher inflation, central banks may increase interest rates to curb spending and stabilize prices. Conversely, if CPI is low or deflation occurs, central banks may lower interest rates to encourage borrowing and stimulate economic activity. Thus, there is often an inverse relationship between CPI and interest rates, influenced by central bank policies.