What Is CPI?
CPI, the Consumer Price Index, tracks how the prices of everyday goods and services change over time. It is the most-watched measure of inflation in the US.
How CPI works
The government tracks the prices of a basket of things people buy: food, rent, gas, clothes, healthcare and more. If the basket costs 3% more than a year ago, CPI inflation is 3%. The report comes out every month.
CPI vs core CPI
Core CPI leaves out food and energy, whose prices jump around a lot. It gives a clearer view of the underlying trend.
Why markets react to CPI
A hotter-than-expected CPI suggests the Federal Reserve may keep interest rates high, which usually pushes stocks down. A cooler reading often lifts stocks.