Consumer Price Index
A measure of inflation that tracks the average change in the price of a basket of goods.
The consumer price index measures inflation as the price change of a basket of goods.
The consumer price index measures how fast the price of a typical basket of goods is rising, which is how inflation is tracked. It is one of the most market-moving releases because central banks set policy partly on it. A hotter CPI reading can push expectations of higher interest rates and move the currency.
How It Works
- It is the standard inflation gauge
- Central banks react to its direction
- A surprise moves rates expectations and the currency
Trading Tips
Watch the core figure that strips food and energy
Read it against the central bank target
Expect the biggest reaction when it surprises forecasts
Consumer Price Index Example
Say CPI prints 3.4% against 3.1% expected. Markets reprice two full rate cuts out of the curve within an hour: dollar up, gold down, stocks red. One tenth of a percent moved trillions because expectations, not levels, trade.
How Traders Use Consumer Price Index
Trade CPI as reaction, never prediction: be flat or small into the print, then follow the repricing. Hotter means hawkish repricing favors dollars. Cooler reverses it. The revision to expectations is the entire trade.
Related Terms
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