Fundamental analysis · Beginner

Inflation and the Consumer Price Index

A 1-minute lesson from the MarketPro academy, one of 24 in fundamental analysis.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

Short answer

Inflation measures how quickly prices for goods and services rise over time, and the Consumer Price Index (CPI) is one of the most widely followed ways to track it. CPI tracks the price of a representative basket of goods and services — food, housing, transport, and more — and compares it to the same basket in a prior period.

Inflation measures how quickly prices for goods and services rise over time, and the Consumer Price Index (CPI) is one of the most widely followed ways to track it.

CPI tracks the price of a representative basket of goods and services — food, housing, transport, and more — and compares it to the same basket in a prior period. When CPI rises faster than expected, it can suggest the economy is running hot, which often raises expectations that a central bank will keep interest rates higher for longer. When inflation cools, it can open the door to lower rates.

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Headline CPI includes all items, while core CPI strips out volatile categories like food and energy to show an underlying trend.
Month-over-month vs year-over-year readings each tell a slightly different story about the pace of price changes.
Producer Price Index (PPI) measures costs at the wholesale level and can hint at future consumer price pressure.

Because inflation data feeds directly into central bank decision-making, CPI releases are frequently among the more closely watched events on an economic calendar. A single data point rarely changes policy on its own; central banks generally weigh a trend across several reports rather than reacting to one release in isolation.

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