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Using the Consumer Price Index (CPI) and Core-CPI as a Measure of Inflation

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    There’s no shortage of headlines about inflation in the United States. The most popular measure of inflation is the Consumer Price Index (CPI). The index reflects the changes in prices of a basket of goods and services that are common amongst U.S. consumers. The Bureau of Labor Statistics (BLS) released its May report finding that inflation climbed 8.6% from a year earlier, the highest increase in decades.

    It is no surprise that the report found energy and food prices were large contributors to the increase. Energy and food prices tend to be more volatile than the rest of the components in the basket and investors will look at Core-CPI, which removes those two categories. The BLS reported that even with the removal of energy and food prices, Core-CPI was up 6% in May.

    Market participants are looking to the Federal Reserve to see the impact the May inflation reading might have on their plan to increase interest rates going forward.

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