Consumer Price Index (CPI)
Tracks changes in the price of a fixed basket of consumer goods and services — the most closely watched inflation gauge.
The Consumer Price Index (CPI) is a monthly statistical measure that tracks price changes for a representative basket of goods and services — food, energy, housing, apparel, medical care, and more. It is the most market-moving inflation data point in the U.S. calendar.
Core CPI (excluding food and energy) is what the Fed watches most carefully because volatile energy prices can distort the underlying trend. A hotter-than-expected CPI print pushes rate-hike expectations forward, sends bond yields up, and typically pressures equities and growth assets.
Example
When U.S. CPI came in at 0.5% month-on-month vs. an expected 0.2% in early 2023, two-year Treasury yields jumped 15 basis points in minutes, the dollar index spiked, and tech stocks opened sharply lower.
Related Terms
Basis Point
One hundredth of one percentage point (0.01%) — the standard unit for quoting changes in interest rates, yields, and credit spreads.
BeginnerCore PCE
The Fed's preferred inflation gauge: the PCE price index excluding food and energy — the gauge the Fed watches to track its 2% inflation goal.
IntermediateDisinflation
A slowdown in the rate of inflation — prices still rise, just more slowly — distinct from deflation, where prices actually fall.
IntermediateFederal Reserve
The U.S. central bank — its rate decisions and forward guidance move global markets more than any other single institution.
BeginnerInflation
The rate at which the general price level of goods and services rises, eroding purchasing power over time.
BeginnerInterest Rate
The cost of borrowing money, set or influenced by central banks — the single most powerful lever in macroeconomics.
BeginnerLagging Indicator
An economic measure that confirms a trend after it has already begun — useful for validating cycle phases but not for anticipating them.
IntermediateProducer Price Index (PPI)
Measures price changes at the wholesale/producer level — a leading indicator of consumer inflation since input costs roll into retail prices.
IntermediateStagflation
The toxic combination of high inflation and stagnating economic growth — the worst macro environment for central banks and equity markets.
Intermediate