CPI (consumer price index)

The consumer price index tracks the cost of a representative basket of consumer goods and services. The percentage change from a year earlier is the headline inflation rate.

Who publishes it

• United States: the Bureau of Labor Statistics, monthly.
• Euro area: Eurostat publishes the Harmonised Index of Consumer Prices (HICP), with a flash estimate at the end of the reference month.
• United Kingdom: the Office for National Statistics, monthly.
• Other countries have their own versions; Australia and New Zealand traditionally emphasised quarterly figures.

Headline and core

Headline CPI includes everything. Core CPI strips out volatile items, usually food and energy, to show the underlying trend. Central banks and markets often focus on core.

Why forex traders watch it

Central banks such as the Fed, ECB and BoE target 2% inflation. A CPI reading above expectations can raise the odds of higher interest rates (or fewer cuts), which tends to support the currency; a softer reading can do the opposite. The reaction depends on the surprise versus the consensus forecast, not the number itself.

Worked example

Illustratively, consensus expects US core CPI to rise 0.3% month on month and 3.0% year on year. The release shows 0.5% and 3.2%. That is a clear upside surprise, and the dollar and US yields may jump within seconds. Spreads often widen around the release and stops can suffer slippage.

See how economic data moves forex and how to use an economic calendar.