When Is the Next CPI Report?

"When is the next CPI report?" was a question no one was asking back in the days of 2% inflation readings.

Alas, those days are long gone. Inflation hit a four-decade high in 2022, prompting the Federal Reserve to embark on its most aggressive campaign of interest rate hikes since the late Carter and early Reagan administrations.

Though inflation peaked back in 2022, price and wage pressures have made the central bank reluctant to reduce interest rates. Cut too soon, the thinking goes, and inflation could resurface, forcing the Fed to pivot again. Abrupt policy changes do not redound to the central bank's credibility. That's why the Consumer Price Index, or CPI report, has become one of the stars of the economic calendar.

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Markets desperately want the Fed to stop raising interest rates – and especially look forward to a time when the central bank pivots to rate cuts – but that won't happen until after inflation is under control. There's also the very real fear that rising rates could cause the economy to fall into a recession.

This explains the market's obsession with the next CPI report. And the one after that, and the one after that.

For the record, the CPI report is released monthly by the Bureau of Labor Statistics, based on price data collected over the course of the month.

Per the BLS, prices for the goods and services used to calculate the CPI are collected in 75 urban areas throughout the country and from about 23,000 retail and service establishments. Data on rents are collected from about 50,000 landlords or tenants. The weight for an item is derived from reported expenditures on that item as estimated by the Consumer Expenditure Survey.

The CPI report is broken down into many subcategories, but the two main ones you'll hear most about on CPI day are headline CPI and core CPI. The headline number is the main inflation gauge. Core CPI excludes volatile food and energy prices, and is considered to be a better predictor of future inflation. The data are expressed as percent changes, and are measured both year-over-year and month-to-month. 

As for the next CPI report, the August inflation figures are slated for release by the BLS on September 11 at 8:30 am Eastern time. The Federal Reserve Bank of Cleveland's Nowcast predicts annual headline inflation to increase by 2.6%, or lower than the 2.9% rate seen in the soft July CPI report. On a monthly basis, August inflation is forecast to rise 0.2%, or the same rate as the previous month.

August's core CPI, which excludes volatile food and energy prices, is expected to increase 3.2% annually and 0.3% on a monthly basis. 

While the inflation data will certainly influence what the central bank does at the next Fed meeting, the CPI report is not the Fed's preferred inflation gauge. Rather, the Fed sets its long-term 2% target based on data contained in the Personal Consumption Expenditures Price Index. 

While it's true the two barometers correlate closely, they measure inflation differently. As James Bullard, former president and chief executive officer of the Federal Reserve Bank of St. Louis, explains:

"The FOMC focused on CPI inflation prior to 2000 but, after extensive analysis, changed to PCE inflation for three main reasons: The expenditure weights in the PCE can change as people substitute away from some goods and services toward others, the PCE includes more comprehensive coverage of goods and services, and historical PCE data can be revised (more than for seasonal factors only)."

There's more, but the bottom line is that the Fed believes the PCE index has some critical advantages over CPI when it comes to setting monetary policy. 

That said, CPI is the better known inflation gauge and it very much informs the Fed's thinking. CPI is also probably more relatable to what consumers experience in their daily lives.

Either way, the FOMC left interest rates unchanged when it last met. It's under increasing pressure to enact at least a quarter-point rate cut in September, and the next CPI report will most definitely become part of the central bank's calculus. 

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