Consumer Price Index (CPI)

Macro & the Fed

The CPI tracks the change in the price of a basket of goods and services bought by households.

In the US it is published monthly by the Bureau of Labor Statistics (BLS), and markets focus on the month-over-month and year-over-year changes. Shelter carries the largest weight in the basket. A hotter-than-expected CPI is usually read as a reason for the Fed to keep rates higher for longer, which can move both bond yields and stocks.

Example

If the basket cost $100 a year ago and costs $103 this month, annual CPI inflation is 3%. If it cost $102.70 last month, the monthly increase is about 0.3%.

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