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Inflation data (CPI, PCE)

In the US, inflation is followed every month through two main releases: the Consumer Price Index (CPI) from the BLS and the Personal Consumption Expenditures (PCE) price index from the BEA. The Fed's inflation goal is defined in terms of PCE. Markets compare the headline and core figures, and the monthly and yearly changes, with expectations.

Yearly change Headline Core Monthly change (headline) Sum of the last 12 months ≈ yearly change
Drawn with illustrative data. The headline line is more volatile because of food and energy; the orange core line moves more smoothly. The bars below show the monthly change; the sum of the last twelve roughly gives the yearly change.

The Consumer Price Index (CPI)

CPI (Consumer Price Index) measures the change in prices that urban consumers pay for a basket of goods and services. It is published monthly by the US Bureau of Labor Statistics (BLS), usually around the middle of the month, for the previous month. It is released at 08:30 ET; 12:30 UTC during US daylight saving time and 13:30 UTC in winter.

Headline CPI covers everything in the basket. Core CPI leaves out food and energy, whose prices are very volatile. A sharp move in energy prices can change the headline figure quickly; the core figure gives a steadier picture of how widely price rises have spread. Markets often pay more attention to the core figure.

Monthly and yearly change

  • Monthly change (m/m): this month's index compared with the previous month. It is seasonally adjusted and shows the recent trend sooner.
  • Yearly change (y/y): the index compared with the same month a year earlier. Roughly the sum of the last twelve monthly changes.
  • Base effect: if the same month a year ago had a large rise, the yearly change can fall when that month drops out of the calculation, even if this month's rise is not small.
  • Calendars usually give forecasts for both headline and core, and for both the monthly and yearly change. Because the figures are rounded to one decimal place, even a 0.1-point difference can count as a surprise.

The Producer Price Index (PPI)

PPI (Producer Price Index) is also published monthly by the BLS and measures the change in prices that domestic producers receive for the goods and services they sell. It is also released at 08:30 ET. It is sometimes read as an early sign of price pressure that may reach consumers.

Some components of the PCE price index are derived from CPI and PPI data. So once both are out, economists can estimate PCE more accurately; PCE surprises are often smaller than CPI surprises.

The PCE price index

The PCE price index (Personal Consumption Expenditures) is published monthly by the US Bureau of Economic Analysis (BEA) as part of the personal income and outlays report, usually in the last days of the month, at 08:30 ET. The Fed defines its longer-run 2 per cent inflation goal in terms of this index, which is why it is known as the Fed's preferred gauge.

Core PCE also leaves out food and energy. PCE covers a wider range of spending than CPI and weights its components differently; housing, for example, carries less weight in PCE. So the two indices can show different figures for the same period.

Why crypto can react

  • Higher-than-expected inflation can strengthen the expectation that rates stay high for longer; lower inflation the opposite.
  • A change in rate expectations often shows in the dollar and in bond yields; these in turn can affect appetite for risk assets.
  • Crypto trades 24/7, so the reaction starts the moment the data are released, and long wicks in both directions can appear in the first minutes.

These are tendencies, not rules. The same surprise can bring different reactions depending on whether the market is focused on inflation, growth or something else at the time.

What it shows, what it does not prove

What it shows

  • How much the general level of prices has changed over the last month and the last year
  • How far the release differs from the forecast, and whether the miss is in headline or core
  • A hint about which way rate expectations may shift

What it does not prove

  • What the Fed will decide at its next meeting
  • Which way crypto or any other asset will move after the release
  • That one month's figure starts a trend; monthly data are volatile and can be revised

The MarketLevelMap view

How it relates to zones

In the minutes after an inflation release, price can wick beyond a support or resistance zone. Reading the zone as a band and judging the reaction by the 1H or 4H candle close after the release helps separate a brief move from a lasting breakout.

CPI usually comes out before PCE and often sees a bigger reaction. When an inflation release is on the weekly calendar, noting the zones near price gives a reference for where the reaction may slow down during the release.

Often confused with

For general information only. Not investment advice.Last updated: