The "Consumer Price Index for All Urban Consumers: All Items Less Food & Energy" is an aggregate of prices paid by urban consumers for a typical basket of goods, excluding food and energy. This measurement, known as "Core CPI," is widely used by economists because food and energy have very volatile prices. The Bureau of Labor Statistics defines and measures the official CPI, and more information can be found in the FAQ (https://www.bls.gov/cpi/questions-and-answers.htm) or in this article (https://www.bls.gov/opub/hom/pdf/cpihom.pdf).
Why This Matters
Core CPI is the Federal Reserve's preferred inflation measure for policy decisions, as it filters out volatile food and energy price swings. More stable than headline CPI, it better reflects underlying demand pressures. The Fed targets 2% annual core CPI growth, making this critical for interest rate decisions and market expectations.
Trading Implications
Core CPI is the Fed's preferred inflation gauge, making it critical for interest rate positioning. Readings above 0.3% monthly typically pressure long-duration bonds and growth stocks while supporting financials. Persistent readings below 0.2% can signal disinflationary trends, boosting long bonds and rate-sensitive sectors. Core trends trump headline for policy implications and long-term positioning.
Data Details
- Source: U.S. Bureau of Labor Statistics
- Frequency: Monthly, Seasonally Adjusted
- Units: Index 1982-1984=100