Monthly and Cumulative Inflation (CPI)

Think of it this way

If year-over-year is comparing the receipt with last year's, this is comparing it with last month's. It is jumpier and noisier, but it notices sooner that something is changing.

What is Monthly and Cumulative Inflation (CPI)?

How much prices rose compared with the previous month. It is the figure that moves stock markets in the ten minutes after release, because it is the first sign of whether the trend is turning. It is calculated on the seasonally adjusted index: without that correction, January would come out high and July low every year because of the retail calendar, not the economy. The other three series accumulate instead of measuring the month: Year to date resets to zero every January; Cumulative by presidential term, at the start of each term; and Cumulative over 10 years, at the start of each decade.

How to read Monthly and Cumulative Inflation (CPI)

Monthly bars. Multiplying by twelve gives the annualized pace, which is how the Fed reads it: three months in a row at 0.2% equal 2.4% a year, very close to target, even if the year-over-year figure still reads 3.5% because of the drag from old months. This series turns before the year-over-year one, which is why it warns earlier. Lag: none; here inflation is the consequence, not the cause.

What Monthly and Cumulative Inflation (CPI) means for the market

It is the data point in this entire section with the greatest ability to move the market in a single day. A tenth of a point above or below expectations changes the probability of a rate cut, and with it the price of bonds, the dollar and risk assets within minutes.

Where the money flows

The same path as the year-over-year figure, but seen through a magnifying glass: it is this month's pulse. An example of why it matters: if it comes in at 0.2% for six months in a row, the annualized pace is 2.4% and the Fed starts talking about cutting rates, even if the year-over-year figure is still high because of what happened eight months ago.

What to watch in Monthly and Cumulative Inflation (CPI)

A single month is not enough: the range over the last fifteen years goes from −0.79% to +1.26% and the noise is high. What you should do is add up the last three months and multiply by four, which is how the Fed's own committee reads it. Three months at 0.2% are equivalent to 2.4% annualized and are enough for them to start talking about cuts, even if the year-over-year figure is still high because of the drag from old months.

The figure that moves the market on release day. It measures the current pace, not the cumulative one.