US Consumer Price Index

The Consumer Price Index tracks the cost of a fixed basket of goods and services bought by urban households in the United States. Each month BLS staff collect tens of thousands of prices from shops, websites and landlords across dozens of metropolitan areas, then weight them by spending patterns taken from the Consumer Expenditure Survey. Shelter is the largest single component, and most of it is imputed from rents rather than house prices, a choice that makes it slow to turn.

Headline CPI is reported both as a monthly change, seasonally adjusted, and as a change over twelve months, not seasonally adjusted. The monthly figure tends to carry more weight on the day, since the annual rate is heavily shaped by what happened a year earlier. A reading above expectations has historically tended to push Treasury yields higher and support the dollar, as markets price a firmer Federal Reserve; a soft number has usually produced the reverse. Equities, particularly rate-sensitive technology names, often react sharply.

Unlike most US data, CPI is not revised after publication, apart from seasonal factors, which are recalculated each February for the previous five years. Energy and food make the headline volatile, which is why many observers look through it to the core measure.

Producer prices, import prices and the PCE price index released later in the month help fill in the picture. The Fed's own target is expressed in PCE terms, not CPI.