Headline Inflation

Loading the player...

What is '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".

BREAKING DOWN '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.

RELATED TERMS
  1. Core Inflation

    A measure of inflation that excludes certain items that face ...
  2. Inflation Targeting

    A central banking policy that revolves around meeting preset, ...
  3. Inflation Trade

    A method of investing that seeks to profit from an overall increase ...
  4. Inflation Swap

    A derivative used to transfer inflation risk from one party to ...
  5. Inflation

    The rate at which the general level of prices for goods and services ...
  6. Corporate Inflation-Linked Securities

    Corporate debt financing securities that offer their holders ...
Related Articles
  1. Economics

    Should You Worry About the U.S Inflation rate?

    Understand how inflation is measured, how U.S. inflation compares to other countries, and if investors should be concerned with rising inflation.
  2. Forex

    How CPI Affects the Dollar Against Other Currencies

    The Consumer Price Index is a broad measure of inflation, and inflation can have a dramatic impact on a currency's value against rival currencies.
  3. Options & Futures

    The Consumer Price Index: A Friend To Investors

    As a measure of inflation, this index can help you make key financial decisions.
  4. Economics

    Macroeconomics: Inflation

    By Stephen Simpson Inflation is a key concept in macroeconomics, and a major concern for government policymakers, companies, workers and investors. Inflation refers to a broad increase in prices ...
  5. Investing Basics

    Inflation's Impact On Stock Returns

    When stocks are divided into growth and value categories, the evidence is clear that value stocks perform better in periods of high inflation, and growth stocks perform better during periods ...
  6. Fundamental Analysis

    What Causes Inflation in the United States

    Inflation is the main catalyst behind U.S monetary policy. But what causes this phenomenon of sustained rising prices? Read on to find out.
  7. Bonds & Fixed Income

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  8. Active Trading

    Shield Your Portfolio From Inflation For Real Returns

    Inflation-protected securities are part of the equation, but they're not a perfect solution.
  9. Investing

    Three Reasons Inflation Isn’t What You Think

    Though U.S. inflation has been firming recently— the core consumer price index rose in April for a 3rd month in a row—prices likely aren’t rising as much.
  10. Retirement

    Inflation: Inflation And Investments

    When it comes to inflation, the question on many investors' minds is: "How will it affect my investments?" This is an especially important issue for people living on a fixed income, such as retirees. ...
RELATED FAQS
  1. What's the highest year-over-year inflation rate in the history of the U.S.?

    Learn about periods with the highest inflation in U.S. history and the mandated role of the U.S. Federal Reserve in controlling ... Read Answer >>
  2. How does inflation affect fixed-income investments?

    Learn about the ways inflation can harm fixed-income investments. Find out how to monitor the impact of inflation using common ... Read Answer >>
  3. What does the current cost of living compare to 20 years ago?

    Find out how inflation has affected the dollar since 1994, and how the cost of living has changed above and beyond what can ... Read Answer >>
  4. What is the difference between the cost of living and the cost of inflation?

    Increases in the general price level is called inflation, whereas cost of living is an estimate of the cost of an average ... Read Answer >>
  5. What's the lowest year-over-year inflation rate in the history of the U.S.?

    Learn about years with the lowest year-over-inflation in U.S. history. Read about how inflation is calculated using the consumer ... Read Answer >>
  6. Does the consumer price index (CPI) correlate with the change in price of goods and ...

    See why the consumer price index is a questionable proxy for inflation, and why it is unlikely to represent experiences with ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center