What is it?
The Consumer Price Index is released by the US Bureau of Labor Statistics and is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services.
Essentially it attempts to quantify the aggregate price level in an economy and measure the purchasing power of a country's unit of currency.
The purchase power of USD is dragged down by inflation.
The CPI is a key indicator to measure inflation and changes in purchasing trends.
What are the Expectations for the (fill in event)?
With this release right around the corner, we take a look at what the expectations are for this release and what it means. The expected figure is 0.2%. This means that prices of goods and services will increase 0.2% over last month.
Professional Insight
“Consumers could see some price rises ahead from a global chip shortage affecting goods such as home appliances, cars and computers", said Iris Pang, Greater China chief economist at ING.
"We believe that the chip price increase has already pushed up prices of fridges, washing machines, TVs, laptops and car prices in April, which increased 0.6%-1.0% month-on-month," she said.
As we all know, China is one of the biggest exporters to the US, and thus there is a clear connection on how this can affect US CPI.
What happens if…
Generally a higher reading is seen as positive for the US dollar which would increase the value to the US dollar against other currencies.
What happens if…
A lower than expected reading is seen as negative for the US dollar which would depreciate its value in the FX markets.
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