US CPI data: what to expect

Simon Alagbe

Analyst

The Consumer Price Index (CPI) is a measure of inflation calculated monthly by the Bureau of Labor Statistics (BLS). The BLS gathers prices regularly to calculate the index. The data helps economists and policymakers determine how the economy is performing and make decisions. The Federal Reserve uses the CPI to determine how much money to give banks to purchase Treasury bonds. Therefore, it's important to understand how this measurement affects the economy.

The first consideration when evaluating inflation data is how economists use it. For example, economists primarily use the CPI to determine how much money people have to spend on goods and services. They also use it to set interest rates for government loans. This means that any change in inflation affects the economy directly by affecting consumer income and by influencing interest rates on debts held by governments and banks. In addition, stockholders monitor inflation data to determine if their investments are gaining or losing value.


Ultimately, economists use CPI data to make predictions about the economy based on changes in consumer spending habits. It's also crucial for setting interest rates and determining how much money the government should spend on goods and services.


CPI data this week
The CPI data recently has led to increased volatility as the high rate of inflation driven by commodity prices has become worrisome. The Federal Reserve seems not to be relenting in its effort to address the spate of growth and bring inflation under control. If the data comes out higher than expected, we will see the dollar recording massive gains against other major currencies (we can't even talk of the Naira at this point). 

Instruments:

All instrument linked to the greenback (US. dollar) will feel the impact of the data and would create opportunity to earn from the volatility. 


NOTE: Traders are encouraged to trade cautiously due to the increased volatility!

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