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What is CPI?
The Consumer Price Index (CPI) measures the average change over time in prices paid by US urban consumers for a basket of goods and services. The headline number includes food and energy; core CPI excludes both because they are volatile. Markets watch CPI as the most-followed inflation indicator and the primary input the Fed uses to gauge whether policy is restrictive enough. A hotter-than-expected print typically pushes 2Y yields and the USD higher and equities lower.
- Headline CPI
- Includes food + energy. Volatile, but newsworthy.
- Core CPI
- Excludes food + energy. Cleaner trend signal.
- Shelter weight
- ~33% of CPI. Slow-moving, lags real-time rents.
- Released monthly
- Around the 10th-15th, BLS, 8:30 AM ET.
How CPI is built
The BLS surveys ~80,000 prices each month across:
- Food (~14%)
- Energy (~7%)
- Shelter (~33%)
- Transportation (~16%)
- Medical care (~8%)
- Other categories
Why markets care
CPI is the Fed's most-watched inflation gauge (alongside PCE). A surprise in either direction repriceses the entire rate path. Watch:
- Headline vs core - divergence signals food/energy noise
- Supercore (services ex-shelter) - Powell's preferred wage-pressure proxy
- Shelter trend - slow-moving but heavy weight
CPI vs PCE
CPI is more newsworthy. PCE is what the Fed targets. They usually move together but PCE is typically 30-50bp lower because of methodology and weight differences.