Nonetheless, in a modern monetary economy, accurate measurement of aggregate price levels is of considerable importance, increasingly so for central banks whose mandate is to maintain financial stability. Accurate price measures are necessary for understanding economic developments, not only involving inflation, but also involving real output and productivity.
If the general price level is estimated to be rising more rapidly than is in fact the case, then we are simultaneously understating growth in real GDP and productivity, and real incomes and living standards are rising faster than our published data suggest.