Headline Inflation

AAA

DEFINITION of 'Headline Inflation'

The raw inflation figure as reported through the Consumer Price Index (CPI) that is released monthly by the Bureau of Labor Statistics. The CPI calculates the cost to purchase a fixed basket of goods as a way of determining how much inflation is occurring in the broad economy. The CPI uses a base year and indexes current year prices based on the base year's values.

The headline figure is not adjusted for seasonality or for the often volatile elements of food and energy prices, which are removed in the Core CPI. Headline inflation will usually be quoted on an annualized basis, meaning that a monthly headline figure of 4\% inflation equates to a monthly rate that, if repeated for 12 months, would create 4\% inflation for the year. Comparisons of headline inflation are typically made on a year-over-year basis.

Also known as "top-line inflation".

INVESTOPEDIA EXPLAINS 'Headline Inflation'

Inflation is a great threat to long-term investors because it erodes the value of future dollars. Inflation can stifle economic growth and cause a rise in prevailing interest rates.

While headline inflation tends to get the most attention in the media, core inflation is often considered the more valuable metric to follow. Core inflation removes the CPI components that can exhibit large amounts of volatility month to month, which can cause unwanted distortion to the headline figure. Both headline and core results are followed closely by investors, and are also used by economists and central banking figures to set economic growth forecasts and monetary policy.

VIDEO

RELATED TERMS
  1. Biflation

    The simultaneous existence of inflation and deflation in an economy. ...
  2. Inflation

    The rate at which the general level of prices for goods and services ...
  3. Deflation

    A general decline in prices, often caused by a reduction in the ...
  4. Core Inflation

    A measure of inflation that excludes certain items that face ...
  5. Seasonality

    A characteristic of a time series in which the data experiences ...
  6. Price Level

    The average of current prices across the entire spectrum of goods ...
Related Articles
  1. Coping With Inflation Risk
    Bonds & Fixed Income

    Coping With Inflation Risk

  2. Get To Know The Major Central Banks
    Forex Education

    Get To Know The Major Central Banks

  3. What You Should Know About Inflation
    Economics

    What You Should Know About Inflation

  4. The Importance Of Inflation And GDP
    Economics

    The Importance Of Inflation And GDP

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center