Imports price index measures the change in price of goods and services imported from host country. The figure is very important for economic growth of country. It is major component of trade balance which measures the difference between imports and exports.
The import price index serves for many purposes:
- Predict domestic inflation and future price
- Deflate government trade statics
- Measure exchange rates
- Help the Federal Reserve Board to decide which monetary and fiscal policy to implement
- Identify global price trends
- Negotiate trade contracts