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).
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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
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