Prices of a typical shopping basket

What moves markets on CPI day?

The gap between actual and forecast

How inflation is measured

When people say “everything got more expensive”, statisticians check. Every month they price the same shopping basket, weighted by what households really spend: food, rent, transport, school, phone bills.
The basket's cost is the consumer price index (CPI). Its change over 12 months is the inflation rate you hear on the news.
Real example: US inflation hit 9.1% in June 2022, a 40-year high. UK and eurozone inflation passed 10% later that year, and interest rates rose worldwide.
Core inflation leaves out food and energy, which jump around with harvests and oil. It shows the underlying trend central banks watch.
Each country publishes its own: BPS in Indonesia, INEGI in Mexico, INE in Spain, the BLS in the US. Markets react to the gap between actual and forecast.
Common mistake
Mistake: “inflation fell, so prices are falling.” Lower inflation means prices are rising more slowly. They rarely go back down.
Key takeaway
CPI is the price of a typical basket. Inflation is how fast that price rises. Markets trade the surprise versus forecast.

CPI tracks... Prices of a typical shopping basketIt's the cost of the same basket of everyday spending, measured month after month.
Core inflation leaves out... Food and energyFood and energy prices swing a lot, so leaving them out shows the underlying trend.
What moves markets on CPI day? The gap between actual and forecastExpected numbers are already in prices; only the surprise is new information.
Inflation falls from 8% to 3%. Prices are now... Still rising, just more slowly3% inflation still means prices are 3% higher than a year ago.