CPI Definition 

A measure of the average price level of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. The consumer price index is the most widely followed indicator of inflation in the United States. Just knowing what inflation is and how it influences the markets can put an investor ahead of the game. Inflation is a general increase in the price of goods and services.

Market influence 

The relationship between INFLATION and INTEREST RATES is the key to understanding how data like the CPI influence the markets. Higher energy prices, manufacturing cost increases, medical costs, imbalances in global supply and demand of raw materials and food products all weigh on this report. For example the price of gasoline we pay at the pumps.

If gas prices escalate to the point where it cost one 30 dollars per week to fill up a car or even to 50 or 60 dollars, you will have less spending money on other items. It may not affect you immediately but a longer duration will hit your pocketbook. Even weather can be a factor on short-term changes on food.

What would the cost of tomatoes at the grocery store after a damaging freeze in California or down south in Georgia be, 3.00 or 4.00 per pound? It has occurred, right. Think of the restaurants that serve salads that lose revenue let alone the farmer whose crop is destroyed. This all plays a part in the CPI number. The core rate is the inflation number that excludes the volatile Food and Energy components. Economists track and watch these numbers; you should too.