SEP · ISSUE 37 · September 11, 2026

CONCEPT

What CPI is and why it moves the market so much

An index that measures how much the cost of living rises, and it sets the Fed's pace.

MEASURES

PRICES

of a fixed basket

EVERY

MONTH

monthly release

USED BY

THE FED

to set rates

THE IDEA

CPI

→ Consumer Price Index

CPI measures how the price of a fixed basket of goods and services changes over time: housing, food, transport, energy. It is the gauge of the inflation you actually pay, which is why it sets the pace at which the Fed raises or lowers rates.

TO GRASP IT

SIMPLE RULE

100

the starting point of any price index

CPI is not a price: it is a relative number. Comparing 100 with 103 tells you cumulative inflation, no dollars needed.

An index always starts at 100. If it rises to 103, prices are up 3% since the start. That simple.

INDEX: — A number that sums up the path of many prices into one.
BASE: — The reference year or moment assigned the value of 100.

THE KEY

CORE IDEA

Inflation is your money losing power

“Inflation does not mean everything goes up: it means your money, sitting still in the account, buys a little less each year.”

Ronfy Analysis · Editorial

It is not that things are 'worth more'. It is that each dollar buys a little less than last year.

PURCHASING POWER: — How much you can actually buy with a given amount of money.
YEAR-ON-YEAR: — A comparison with the same month a year earlier (YoY).

HOW IT WORKS

EXAMPLE

How a price index climbs

YEAR 0YEAR 2YEAR 4YEAR 6

Illustrative curve, not real data. The steeper the line, the faster the cost of living rises.

Illustrative example. The index starts at 100 and rises as the basket gets pricier. The slope IS the inflation.

SLOPE: — The steepness of the line. Here, the speed of inflation.
CUMULATIVE: — The total rise since the start, not just one month's.

THE ESSENTIALS

4 KEYS

Four things to know about CPI

IT TRACKS A FIXED BASKET
It follows the price of a representative set of goods and services, not a single product.
HEADLINE vs CORE
Headline includes everything; core strips out food and energy, the volatile parts, to show the underlying trend.
IT SETS THE FED'S PACE
If inflation speeds up, the Fed tends to raise rates; if it cools, to cut them. That is why it moves so much.
IT AFFECTS YOU
High CPI means your salary and savings buy less in practice, even if the number on them does not change.

With these four ideas you understand 90% of what gets said on data day.

CORE: — Core inflation: excludes food and energy to show the trend.
VOLATILE: — Moves up and down a lot and fast, making the real trend hard to read.

INSIDE IT

THE BASKET

What sits inside CPI

HOUSINGRent + cost of shelter34%

TRANSPORTCars, fuel, insurance16%

FOODGroceries + dining out13%

EVERYTHING ELSEEnergy, health, leisure, goods37%

Approximate weights of a typical basket. Housing alone is worth a third of the number.

Not every price counts the same. Housing dominates, which is why the market watches it so closely.

WEIGHTING: — How much each category counts within the total index.
SHELTER: — The housing component of CPI: the one with the largest weight.

TO SEE IT

5 EXAMPLES

Five assets that react to inflation

TIP	110	→ 0.0%	Inflation-linked bonds. Their principal adjusts with CPI: direct protection.
SGOV	100	→ 0.0%	Short-term T-bills. Their yield rises when the Fed reacts to inflation.
GLD	410	→ 0.0%	Gold. A classic haven when money loses purchasing power.
XLE	95	→ 0.0%	Energy. Energy is part of the basket: its prices feed CPI itself.
VTV	180	→ 0.0%	Value stocks. Tend to hold up better than growth when inflation bites.

Representative examples of the concept, not a recommendation. Prices are rounded and illustrative.

TIPS: — Treasury Inflation-Protected Securities: principal adjusts with CPI.
VALUE: — Cheap, steady stocks, less rate-sensitive than growth names.

Next time CPI drops, you will know what is at stake

One concept a day and the market stops feeling like a language you cannot read.

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Daily briefing · Mon-Fri 16:00 ET

CPI: — Consumer Price Index. The inflation you actually pay.
FED: — The Federal Reserve, the US central bank that sets rates.

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