What it means
A hot CPI makes rate hikes more likely: the dollar tends to rise, stocks and gold to fall.
Example
An index going from 300 to 309 in a year is 3% inflation.
In practice
Inflation is what central banks are trying to control, so CPI is among the most market-moving reports of the month. Traders compare the monthly and yearly figures, and core CPI in particular, with the forecast.
A reading above forecast points to higher rates for longer; one below it points to cuts. Many traders stay flat into the release and trade the reaction once it settles.
What to watch for
The minutes around the release bring wide spreads, slippage and violent moves in both directions. A stop placed just before it can fill far from its price.
Related terms
3 terms- Interest rateThe price of money set by central banks; higher rates usually lift the currency and weigh on stocks and gold.
- FOMCThe Fed committee that sets US interest rates, eight times a year: decision at 2:00 pm, press conference at 2:30 pm.
- Economic calendarA schedule of data releases and events with their time, expected impact, forecast, previous and actual values.