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. Core Inflation

    A measure of inflation that excludes certain items that face ...
  3. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Hedonic Pricing

    A model identifying price factors according to the premise that ...
  6. Deflation

    A general decline in prices, often caused by a reduction in the ...
Related Articles
  1. Bonds & Fixed Income

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  2. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  3. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  4. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  5. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  6. Investing Basics

    Five Successful Investing Strategies

    The secret to investing is that there is no secret. Success is all about knowing yourself, getting the basics and using both to make the right choices.
  7. Investing

    Will 2015 Finally Be The Year For Rising Rates?

    Interest rates continued declining in 2014, but as we enter 2015 many investors are asking the same question: Will 2015 be the year for rising rates?
  8. Economics

    Is the consumer price index (CPI) the best measure of inflation?

    Discover how the CPI is one of the most used indexes to measure inflation, but due to its limitations, the PPI and GDP deflator are also required.
  9. Fundamental Analysis

    What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns.
  10. Economics

    Can state and local governments in the US run fiscal deficits?

    Discover why most state and local governments do not – or cannot – run fiscal deficits in the same manner as the U.S. federal government.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center