What you'll learn
- Read a CPI release: headline, core, monthly and annual
- Understand why core matters more to central banks
- Know the related measures such as PCE and producer prices
Reading the release
| Figure | Meaning | Why it matters |
|---|---|---|
| Headline CPI, year on year | Prices now versus a year ago, all items | The public number; the one in headlines |
| Core CPI, year on year | Excluding food and energy | The central bank's preferred read of underlying inflation |
| Month on month | Change from the previous month | The most current signal; three months of it annualised shows the trend |
| Surprise | Actual minus consensus | What the price reacts to |
Why core
Food and energy prices swing with weather and oil, and a central bank cannot do much about either with interest rates. Core inflation shows the part of inflation that policy can affect, driven by wages, rents and services, and it is the part that persists. A high headline with a falling core is read very differently from a high core.
Related measures
- PCE, personal consumption expenditures: the Fed's official target measure, released later than CPI and usually less surprising because CPI has already shown the direction.
- Producer prices, PPI: what producers charge; a leading indicator of consumer prices.
- Harmonised CPI in the eurozone, and the ECB's focus on core.
- Inflation expectations from surveys and from bond markets, which central banks watch to see whether inflation is becoming entrenched.
Trading the release
CPI is released at a scheduled minute and the move is immediate. Spreads widen, slippage is severe, and positions taken in the seconds around it are gambling on the print. Many traders wait for the first minutes to pass and trade the reaction against the higher timeframe structure; prop firms often forbid trading in the window. The lesson on reading the calendar covers the practicalities.
Key takeaways
- Read headline, core, monthly and the surprise against consensus.
- Core inflation is what central banks act on.
- PCE, PPI and expectations round out the picture.
- The release minute is not a trading opportunity for most people.
Knowledge check
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This lesson is general education, not advice. Risk disclosure.