The CPI (Consumer Price Index) measures the average price change of a representative basket of goods and services consumed by households. It's the reference inflation indicator in most developed countries.
Basket composition (US 2024-2026, as example):
- Housing: ~33%
- Transportation: ~17%
- Food and beverages: ~14%
- Medical care: ~8%
- Recreation, education, other: ~28%
Key sub-indices:
- Headline CPI: all prices, including energy and food
- Core CPI: excludes energy and food (volatile) → better reflects the underlying trend. This is the figure the Fed watches most.
- Super-Core: services excluding housing → indicator of sticky inflation tied to wages
US release schedule: 2nd or 3rd week of the month at 8:30 AM ET. Like NFP, it's a high-volatility event for EUR/USD, DXY, stocks, and gold.
Reading the numbers:
- CPI YoY (year-over-year): 12-month change — the main figure cited in media
- CPI MoM (month-over-month): monthly change — catches inflections faster
- Fed and ECB target: 2%/year. Above this, central banks hike rates. Below for prolonged periods, they cut.
Market impact:
- Higher-than-expected CPI: hawkish Fed → USD ↑, stocks ↓, bonds ↓ (yields ↑)
- Lower-than-expected CPI: dovish Fed → USD ↓, stocks ↑, bonds ↑ (yields ↓)
- Bitcoin reacts like a risk asset: low CPI = bullish Bitcoin (loose monetary policy)