Consumer Price Index (CPI)
The Consumer Price Index (CPI) measures the average change over time in prices paid by urban consumers for a basket of goods and services.
The CPI is published monthly by the Bureau of Labor Statistics (BLS). It tracks prices for thousands of items in categories such as housing, food, energy, transportation, medical care, apparel and recreation, weighted by how much households typically spend on each.
The headline number is usually reported as the change versus the same month a year earlier, along with the month-over-month change. Core CPI excludes food and energy, whose prices swing more, to show the underlying trend.
CPI is one of the most market-moving economic releases. A higher-than-expected reading can raise expectations of tighter Federal Reserve policy, sending bond yields up and often pressuring stocks. CPI is also used to adjust Social Security benefits, tax brackets and the principal of TIPS.
Example: if the CPI index level rises from 300 to 309 over twelve months, annual CPI inflation is 3%. The Fed's preferred inflation gauge is a related measure, the PCE price index, which usually runs slightly lower than CPI.