What CPI measures
The U.S. Bureau of Labor Statistics describes CPI as a measure of the average change over time in prices paid by urban consumers for a market basket of goods and services.
Headline vs core CPI
Headline CPI includes all major categories. Core CPI typically excludes food and energy because those components can be volatile. Traders often compare both measures with expectations and prior readings.
Why markets move
A surprise inflation reading can change expectations for interest rates. That can affect Treasury yields, the U.S. dollar, gold, equity valuations and crypto liquidity conditions.
The market reaction depends on expectations. A number that looks high in isolation may produce little reaction if it was already priced in.
Release-day checklist
- Actual vs consensus forecast.
- Month-over-month and year-over-year readings.
- Core vs headline.
- Revisions to prior data.
- Immediate move in yields and the U.S. dollar.
Sources & further reading
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