Today, the Bureau of Labor Statistics released the CPI data, the most widely used measure of inflation. The index rose 0.4% in November, preceded by October's rise of 0.3%. If we exclude the increase in Food and Energy, the most volatile components, the index was flat at 0%. CPI tracks the weighted average of prices of a basket of goods and services from month to month. CPI is used to adjust the cost-of-living for both government programs as well as private contracts. This measure includes sales taxes associated with purchases of 200 categories in the index, but excludes Social Security taxes, investing in Stocks, Bonds, or Life Insurance.
CPI is the most followed economic indicator and is considered to be a market mover. If a sustained rise in the CPI will cause the Federal Reserve, our central bank, to tighten monetary policy. In other words, interest rates will rise (cost of borrowing or re-financing will go up).
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