October CPI Report: What the Experts Are Saying About Inflation

Although the two CPI indexes calculated from the data both contain the word urban, the more broad-based and widely cited of the two covers 93% of the U.S. population. In 2012, the PCE Price Index became the primary inflation index used by the U.S. It is used instead of the CPI because the PCE Price Index is composed of a broad range of expenditures that exceeds the limited basket of goods used in the CPI. The PCE Price Index is also weighted by data acquired through business surveys, which tend to be more reliable than the consumer surveys used by the CPI. If the next CPI report surprises to the upside like the January jobs report did, it will further dash hopes for a more dovish central bank in the latter part of 2023. Worse, rising interest rates raise the possibility of a Fed-induced recession.

The Next CPI Report: What to Expect

The calculation of the CPI indexes from the data factors in substitution effects—consumers’ tendency to shift spending away from products and categories has grown relatively more expensive. The weighting of the product and service categories in the CPI indexes corresponds to recent consumer spending patterns derived from a separate survey. The owners’ equivalent category models the rent equivalent for owner-occupied housing to properly reflect housing costs’ share of consumer spending.

It is still the “headline” number – and as such, it continues to play an outsized role in forming public opinion about inflation. With the January CPI report now a matter of record, we turned to economists, strategists and other experts for their thoughts on what the data means for markets, macroeconomics and monetary policy going forward. The CPI Index is an inflation indicator closely watched by policymakers and financial markets. A related CPI measure is used to calculate cost-of-living adjustments for federal benefit payments.

How Is the Consumer Price Index (CPI) Used?

The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. The calculation also factors in the substitution effect as consumers shift spending away from the products rising in price on a relative basis. The CPI, which measures the retail prices of goods and services at a specific time, is one of the most commonly used inflation measures because it reflects changes to a consumer’s cost of living. Core CPI, which excludes volatile food and energy prices and is considered to be a better predictor of inflation, increased 4% over the past 12 months – the slowest rate since September 2021. The CPI report is broken down into many subcategories, but the two main ones you’ll hear most about on CPI day are headline CPI and core CPI.

For this reason, the CPI may not adequately reflect each individual’s experience about costs and changes over time. As the traditional CPI-U calculation only measures inflation for urban populations, it remains a bitcoin price in usd chart 2021 less-than-reliable source of data for individuals living in rural areas. The CPI does not explicitly state how different demographics may be impacted by inflation.

Core CPI excludes volatile food and energy prices, and is considered to be a better predictor of future inflation. The data are expressed as percent changes, and are measured both year-over-year and month-to-month. The CPI is widely used by financial market participants to gauge inflation and by the Federal Reserve to calibrate its monetary policy.

U.S. March Inflation Data Exceeds Expectations Again

Though inflation peaked back in 2022, the fact remains that it’s still too high for the central bank’s comfort. That’s why the Consumer Price Index, or CPI report, has become pretty much the star of the economic calendar. Comparing the two measures shows that the CPI almost always runs “hot” – exaggerating the apparent threat of inflation.

U.S. Annual Inflation Rate Eases to 2.9% in July, the Slowest…

A higher CPI often means that a less stringent government policy is generally in place. This means that debt is often easier to obtain for cheaper and that individuals have greater spending capacity. On the other hand, lower or decreasing CPI may indicate that the government may ease policies that help boost the economy. Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom. Today, at the heart of the transition to tmo stock forecast, price and news digital, we combine our industrial power with innovative computerised solutions to create even more value for our customers.

1. The monthly CPI is still treated as the most important inflation metric by most of the leading media channels.
2. Overall, it is reasonable to mark down the year-over-year CPI from 3.7% to around 2.7% or so, as the more likely level of “true” inflation (on a year-over-year basis).
3. On the other hand, criticism concerning the quality adjustments used in the CPI has been widely discounted by economists.
4. Interest rate traders currently assign a 95% probability to the FOMC leaving rates unchanged at a target range of 5.25% to 5.5% when it concludes its December policy meeting, according to CME Group’s FedWatch Tool.

The inflation rate is reported as a percentage and is often positive (assuming current market prices are appreciating). The Consumer Price Index (CPI) measures inflation by tracking the changes in prices paid by consumers for a basket of goods and services over time. These goods and services include food and beverages, housing, apparel, transportation, medical care, recreation, education, and communication. The latest inflation data should allow the Federal Open Market Committee (FOMC) to keep interest rates unchanged once again at the next Fed meeting.

But as an antidote to the inflation panic that the CPI generally induces, these adjustments show that the true picture today is much less alarming than the headline figure. The level of price inflation is likely 1% to 2% lower than the CPI number, which would bring it well in line with the Federal Reserve’s 2% target. Expectations that the Fed could enact as many as six cuts in 2024 helped the market rally hard into the end of last year. Over the years, the CPI has frequently drawn criticism that it has either understated or overstated inflation. Because the CPI is based on consumer spending, it doesn’t track third-party reimbursements for healthcare and significantly underweights healthcare relative to its proportion in the GDP as a result.

Experts Weigh in on the Next CPI Report

As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities. With the October CPI report now a matter of record, we turned to economists, strategists and other experts for their thoughts on what the data means for markets, macroeconomics and monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below. Markets desperately want the Fed to stop raising interest rates – and especially look forward to a time when the central bank pivots to rate cuts – but that won’t happen until after inflation is under control.

The Bureau of Labor Statistics publishes the CPI monthly, which reflects changes in the cost of living in the U.S. Additional indexes also measure inflation and include the Personal Consumption Expenditures (PCE) Price Index, the Producer Price Index (PPI), and the Gross Domestic Product (GDP) deflator. In response to higher-than-desired inflation rates via the CPI, the Fed adjusts the Fed funds rate. The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers.

The gap between the unadjusted CPI and the inflation metrics that employ volatility-reduction techniques is larger still. The headline number ranges up to 250 basis points above the adjusted figures. It is also generally agreed that the volatility in the inflation signal should be reduced to get an accurate picture of the broad price trends in the economy. There are many ways to attack this, and the Federal Reserve system has spawned at least half a dozen alternative volatility-reducing metrics.

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Below please find a selection of commentary from economists, strategists and other market pros on what to expect from forex trading fundamentals the next CPI report, sometimes edited for clarity or brevity. But try as the Fed might to tame inflation by increasing unemployment, the labor market has thus far refused to play along. These facts alone make it harder for the Fed to ease up on its rate policy.