BTC/USD

$67,573.10 1.10%

ETH/USD

$3,763.92 1.99%

USD/EUR

$0.93 0.06%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.14 0.04%

BTC/USD

$67,573.10 1.10%

ETH/USD

$3,763.92 1.99%

USD/EUR

$0.93 0.06%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.14 0.04%

BTC/USD

$67,573.10 1.10%

ETH/USD

$3,763.92 1.99%

USD/EUR

$0.93 0.06%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.14 0.04%

BTC/USD

$67,573.10 1.10%

ETH/USD

$3,763.92 1.99%

USD/EUR

$0.93 0.06%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.14 0.04%

What is CPI and How Does it Impact the Stock Market?

What is CPI and How Does it Impact the Stock Market?

CPI stands for “Consumer Price Index”. It’s a measure of how much the prices of goods and services in an economy have changed over time. It tells us how much more or less expensive things have become compared to a previous period.

The CPI is calculated by tracking the prices of a basket of goods and services that are commonly purchased by consumers.

This basket might include things like food, housing, transportation, healthcare, and entertainment. The prices of these items are monitored over time. Changes in the overall cost of the basket are used to calculate the CPI.

When the CPI goes up, it means that the cost of living is increasing because prices are rising. When the CPI goes down, it means that the cost of living is decreasing because prices are falling.

Policymakers use CPI as a tool to help them make decisions about things like interest rates, inflation, and government spending.

How does CPI impact the stock market?

“Bad” CPI shows a higher-than-expected rate of inflation. This can have an impact on the market in several ways:

Interest rates may rise:

Central banks, such as the Federal Reserve in the US, may increase interest rates to try and control inflation. Higher interest rates can make borrowing more expensive, which can slow down economic growth and potentially decrease stock market values.

Companies may have to pay more for their inputs:

If the CPI is high, it may mean that the prices of raw materials and other inputs that companies need to produce their goods and services have increased. This can result in higher costs for companies, which can eat into their profits and potentially decrease their stock prices.

Investors may become more cautious:

High inflation can erode the value of money over time. Investors may become more cautious and move their money into assets that can help protect against inflation. This could be into commodities or real estate. Which can lead to a decrease in stock market values.

It’s important to note that the impact of a “bad” CPI on the market can vary depending on the specific circumstances. This could be the severity of the inflation, the state of the economy, and the actions taken by policymakers in response.

Share

Never miss another one of our free Tips, Plays or Strategies again

Join our newsletter to stay up to date with the latest market news and trading tips.