The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. 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.1
The CPI is one of the most popular measures of inflation and deflation. The CPI report uses a different survey methodology, price samples, and index weights than the producer price index (PPI), which measures changes in the prices received by U.S. producers of goods and services.
Understanding the CPI Data
The BLS collects about 80,000 prices monthly from some 23,000 retail and service establishments. 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.
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. It also adjusts price data for changes in product quality and features. The weighting of the product and service categories in the CPI indexes corresponds to recent consumer spending patterns derived from a separate survey.
Consumer Price Index (CPI) Used?
The CPI is widely used by financial market participants to gauge inflation and by the Federal Reserve to calibrate its monetary policy. Businesses and consumers also use the CPI to make informed economic decisions. Since CPI measures the change in consumers’ purchasing power, it is often a key factor in pay negotiations.
What Is the Current CPI?
The annual change in the CPI was 3.2% for the 12-month period ending July 2023. This was a 0.3% increase from the previous month.
a higher CPI indicates higher inflation, while a falling CPI indicates lower inflation, or even deflation. In that respect CPI figures can be very important for forex markets particularly, since the rate of inflation impacts on monetary policy decisions and the interest rates set by central banks.
We are expecting the CPI will be the same so that EURUSD will fall. If it rises, only the EURUSD will increase, which has significantly less chance.
The Consumer Price Index is an important economic metric. It measures the average change in prices paid by consumers over a period of time for a basket of goods and services. The index is calculated and published monthly by the Bureau of Labor Statistics. It is among the most common measures of inflation, indicating the health and direction of the economy.