Core CPI

Core CPI is the Consumer Price Index with food and energy taken out. Those two move on weather and oil politics, so stripping them out leaves the trend the Fed can actually do something about. Markets trade core and largely wave the headline number through.

The release lands at 8:30 a.m. ET around the middle of the month. Outside payrolls it is usually the biggest scheduled volatility event on the calendar. Traders read the month-over-month core figure to the second decimal, because the difference between 0.2% and 0.3% compounds to nearly 1.2 points of annualized inflation, which is enough to shift the whole expected Fed path. Within seconds the print starts getting taken apart. Shelter, core goods, and supercore, which is core services minus housing, all carry their own weight for policy.

Forecasts bunch up tightly on this one, so a 0.1pp miss is a genuine surprise, often a full z-score or more. And although the Fed's formal target is PCE inflation rather than CPI, CPI lands first every month, so it moves markets more.

Say consensus is looking for +0.3% m/m on core and the print comes in at +0.2%, with the year-over-year rate easing from 3.1% to 2.9%. Inside a minute the 2-year yield is down 11bp, fed funds futures have added 60% odds of an earlier cut, and equity futures are up 0.8%. One tenth of a percentage point did all of that.