Inflation Data: CPI, Core and PCE

One of the two most awaited monthly releases in the US market is inflation (the other is jobs). The reason is indirect: inflation determines what the Fed does; the Fed sets rates; rates set everything.

Why Food and Energy Get Removed

It feels backwards: food and fuel are what people notice most. But those two items swing with weather and geopolitics. A cold snap or an oil supply cut pushes headline inflation up for a few months, then lets it fall back.

The central bank looks at the persistent trend, because a rate decision takes months to reach the economy. Reacting to a temporary spike with a hike would be an error whose effect arrives only after the spike has passed.

CPI vs. PCE

PCE accounts for substitution: when beef gets expensive, people switch to chicken, and PCE reflects it. CPI, with its fixed basket, doesn't see the switch.

The Fed's 2% target is defined on core PCE. Checking headline CPI and declaring "target missed" is reading the wrong thermometer.

How to Read a Release

Every release carries four numbers, and the market compares all four:

How the Market Reacts

If inflation comes in above expectations:

• Treasury yields rise (the Fed stays tight for longer)
• Growth stocks fall
• The dollar strengthens

Below expectations — the exact reverse.

The size of the reaction scales with the surprise, and the surprise is measured in decimals: a 0.1-point miss on annual core can move the index a full percent.

Where You'll See It on This Site

• The Macro screen: CPI, core CPI, core PCE and the policy rate together, with their history.
• The Calendar: release dates with times, the high-impact ones marked with a red dot.
• The Today's Flow strip on the home page shows the release time in both New York and Istanbul time.