CPI (All Urban)

What Is CPI?

The Consumer Price Index (CPI) is published monthly by the Bureau of Labor Statistics (BLS) and measures the average change over time in the prices paid by urban consumers for a market basket of goods and services. It is the most widely followed inflation indicator globally.

Headline vs Core CPI

- **Headline CPI**: Includes all items, including the volatile food and energy categories - **Core CPI**: Excludes food and energy. Because food and energy prices can swing wildly due to commodity and supply shocks, core CPI is considered a better underlying signal of sustained inflation. The Fed focuses more on Core PCE, but core CPI is widely watched.

The Basket

The CPI basket is based on consumer expenditure surveys and includes hundreds of categories: - **Shelter** (~33%): Primarily Owner's Equivalent Rent (OER) and rent of primary residence - **Food** (~14%): Groceries and restaurants - **Energy** (~7%): Gasoline, electricity, natural gas - **Medical care**: Insurance, doctor services, pharmaceuticals - **Transport**: New and used vehicles, auto insurance

Shelter's Dominance and Lag

Shelter is the largest CPI component. The BLS measures it using OER — a survey-based measure that lags real-world rent changes by roughly 12–18 months. This lag made CPI appear elevated in 2023–2024 even as market rents were falling.

CPI and Market Reaction

Monthly CPI prints are among the highest-impact macro data releases. A "hot" print (above expectations) sends bond yields higher, equities lower, and the dollar up. A "cool" print does the reverse. The market typically moves most violently on the core month-over-month (MoM) figure.