CPI (Consumer Price Index)
The headline gauge of how much prices rose, bundling the prices of goods and services consumers buy — the key yardstick for measuring inflation.
In plain terms
CPI bundles the goods and services we buy day to day (food, rent, transport, healthcare, etc.) into one basket and measures how much their prices rose versus last year. It is the most representative ruler for measuring inflation (rising prices).
The US Labor Department releases it monthly, and it is one of the indicators the market watches most closely. When CPI comes in higher than expected, the market swings on "prices aren't under control → the Fed may raise rates more."
What it tells you
CPI is the number the Fed watches most when setting rates. So a CPI release is a hint at "the direction of rates," shaking the whole market regardless of individual company results.
Look at core CPI, which strips out volatile energy and food, alongside it — to clear away temporary swings and see the real price trend.
Formula
CPI = a price index of a basket of representative consumer items (food, housing, transport, etc.) CPI change (YoY) = the rise versus the same month a year ago = the inflation rate
What high or low means
When CPI growth runs above the Fed's target (usually 2%), tightening (rate-hike) pressure builds; when it falls, easing expectations grow.
What matters is "versus expectations." The market has already priced in the expected CPI, so it moves big when the release strays from expectations.
CPI is on an "average basket" basis, so it can differ from each person's felt inflation. A home buyer and a renter, a driver and a non-driver, each feel it differently.
Looking only at headline CPI (the total) leaves you swayed by energy and food swings. For the trend, core CPI is more accurate.
CPI is a macro indicator, so the market reaction is not always textbook. This term is background for understanding market news. (※ Our screen handles individual companies' SEC-filed financials and does not provide macro indicators like CPI itself.)
In 2022, US prices (CPI) spiked to 9.1% year over year in June, a roughly 40-year high. On every CPI release day the market swung sharply on the fear that "prices are higher than expected → the Fed will raise rates more."
The Fed indeed raised the policy rate fast from near 0% to the 4% range that year, and US stocks fell into a bear market over 2022. It was a year that vividly showed how a single macro indicator like CPI can sway the whole market, regardless of individual company results.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see CPI and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.