Consumer Price Index
Annual inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 3.5% in June from the three-year high it set at 4.2% in May, the US BLS reported on Tuesday.
Consumer Price Index ex Food & Energy (YoY)
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What is the US CPI?
The Consumer Price Index released by the US Bureau of Labor Statistics measures price movements by comparing the retail prices of a representative basket of goods and services. Inflation reduces the purchasing power of the US Dollar (USD), and the CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a higher CPI reading is seen as positive (bullish) for the USD, while a lower reading is viewed as negative (bearish).
Why it matters to traders?
The US Federal Reserve (Fed) has a dual mandate: to maintain price stability and achieve maximum employment. As part of this mandate, inflation is targeted at around 2%. Inflation became a critical challenge for the Fed, especially in the aftermath of the Covid-19 pandemic, with the CPI reaching multi-decade highs due to persistent supply-chain issues and bottlenecks. The Fed decided to increase interest rates sharply to tame inflation.