The Consumer Price Index is the most-watched economic report on US inflation. We get updates on it around the middle of every month.
On Wednesday, we’ll get April’s report of CPI data. Economists surveyed by Bloomberg think CPI grew 5% year over year.
Here’s what you need to know:
- Inflation is historically high, and the Fed is hiking rates to cool inflation down.
- In March, CPI data showed prices are rising at a 5% annual clip, much higher than the 1.8% average inflation during the 2010s.
- These days, high inflation is mainly due to services prices — rent, the cost of a haircut, airline tickets, etc. — versus goods (or actual items you buy).
- The Fed’s rate hikes are working, too. CPI has slowed for nine straight months, and it’s helped lift both stock and crypto prices. In the market’s eyes, gradually slowing inflation could be the ideal scenario — cooling prices without a recession.
The takeaways:
- Understand CPI’s impact on your portfolio. Since the beginning of 2022, the S&P 500 has moved an average of 1.7% and Bitcoin has moved an average of 4.3% on days when CPI reports have been released. If you’re an investor, you may want to prepare for a big market move in either direction.
- Revisit your view on the economy. Inflation is one of the biggest stories in the economy right now. Slower inflation could ease the pressure on our wallets and help bolster spending, and consumer spending accounts for 70% of the economy.
- Think about what works in a low-rate environment. Lower inflation could allow the Fed to keep easing up on rate hikes. Rates are still high, but that could be an argument to get into rate-sensitive sectors like tech, real estate, and crypto.
*Data sourced through Bloomberg. Can be made available upon request.