Inflation reports are used by forex traders to monitor the overall changes in the prices of goods and services and are key inputs to determining monetary policy expectations.

Increases in inflation are likely to be met with higher interest rates as central bank policy makers seek to keep inflation in check, whilst moderating or declining inflation would suggest lower interest rate expectations.

There are a number of different inflation measures:-

Consumer Price Index (CPI): The most familiar measure of inflation measures the cost of a set basket of goods and services for the consumer at the point of purchase.

Producer Price Index (PPI): The PPI measures changes in prices that firms are charging each other at the producer level and is one level further up the chain from the CPI. The PPI can therefore be seen as leading indicator to the CPI.

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