Consumer Price Index, CPI – Things to Know
Consumer Price Index or CPI is one of the most widely watched economic indicators which give a clear idea about economic situation through 3 different indices. CPI is released by Bureau of Labor Statistics (BLS). The 3 indices include CPI for urban wage earners (CPI-W), CPI for urban customers (CPI-U) and chained CPI for urban customers (C-CPI-U).
Consumer price index releases affect companies and investors in many ways. CPI is one of the factors which affect Federal Reserve interest-rate policy, financial management of big corporations and banks, tax rates, and employee wages. A rise in CPI indicates inflation; fall indicates deflation and staying steady indicates stagflation. Usually growing economies shows modest growing inflation. Rapid rise or fall in CPI is not a good sign for economy; both high inflation and deflation ultimately results in cutting down of profit of companies, thus making them less competitive.
High inflation badly affects fixed-income bonds, pensions and other fixed annuities. Investors can hedge against inflation by diversifying their portfolio, and using futures contracts against inflation or Treasury Inflation Protected Securities (Tips).
Consumer price index releases affect companies and investors in many ways. CPI is one of the factors which affect Federal Reserve interest-rate policy, financial management of big corporations and banks, tax rates, and employee wages. A rise in CPI indicates inflation; fall indicates deflation and staying steady indicates stagflation. Usually growing economies shows modest growing inflation. Rapid rise or fall in CPI is not a good sign for economy; both high inflation and deflation ultimately results in cutting down of profit of companies, thus making them less competitive.
High inflation badly affects fixed-income bonds, pensions and other fixed annuities. Investors can hedge against inflation by diversifying their portfolio, and using futures contracts against inflation or Treasury Inflation Protected Securities (Tips).
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posted by Daniel Pipitone at
6:31 AM
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