The Consumer Price Index is closely watched by investors and Wall Street. Essentially, it’s a read on how price changes on consumer goods and services. For example, that grocery bill that just keeps climbing every month is recorded in the CPI print.
For the past year, the CPI print has been especially important as the Federal Reserve battles inflation through aggressive interest rate hikes.
Ross Mac of Maconomics took a look at the CPI data over the past few months noting that, “we have seen that the largest outliers are energy and food, which are up 20% and 11%, respectively. Also in that basket, you have other categories that consumers spend money on such as housing, transportation, education, and recreation to name a few.”
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But the October data is going to be key for the markets. Real Money’s James DePorre explained why in a recent column.
“The CPI report will hit [Thursday] morning, and that is going to be a significant market mover. We will see positioning in front of that number [Wednesday]. The market has been too optimistic about cooling inflation, and there is a danger that this may be the case again. Even if CPI does fall to an 8% annual rate as expected, it is still quite elevated, and there are indications that it will stay sticky to the upside. The Fed is not convinced that it is winning this battle. However, if CPI is not red hot again, then that will likely increase the odds of a 0.5% hike in December rather than another 0.75% hike.”
But Mac adds another level to the importance of the October print and that’s the cost of living index.
“With inflation up over 8%, technically, you should demand an 8% raise…the cost of living index also determines how much money you can contribute to tax-advantaged retirement accounts on a yearly basis,” he said.
With the data release scheduled for Thursday morning, investors are prepared for a reaction from the market, especially since the red wave that had been anticipated did not pan out, though the Republicans are still expected to take the House.
