CONSUMER PRICE INDEX

Before going to the CPI let us understand a little bit about Inflation.
What is inflation:-
Inflation is an economic state in which goods prices keeps rising and purchasing power keeps declining over a period of time
The rise in prices which is often expressed as a percentage means that a unit of currency effectively buys less than it did in prior periods
         To measure and to indicate inflation we have two commonly used indicator :
1. CPI(CONSUMER PRICE INDEX)
2. WPI(WHOLESALE PRICE INDEX)
CPI (CONSUMER PRICE INDEX):-
Cpi is a important economic event & indicator that is used by small retail trader to policy maker .
         In this article we will not go into the mechanics of how it is calculated instead we will focus on three following things :-
1.what is CPI 
2. What's the impact of CPI increasing & decreasing 
3. Relation between CPI & FOMC 
what is CPI :  
                CPI is an important economic indicator as we discussed above 
-                 It measures the average change in prices paid by consumer over a period of time for a basket of goods and services .
-            This index is calculated and published monthly by the BLS (BUREAU OF LABOUR & STATISTICS)
WHAT IS IMPACT OF CPI  : 
- [ ]        On the basis of CPI ,policy makers decides what to do next with likes BANK RATE etc.
- [ ] CPI not only gives you inflation data over a period of time for specific items but also gives you inflation rate ,with what rate prices are soaring or dropping .
- [ ] With high inflation rate ,few sectors take it positive or few take it negative that depands on you are on which side of the coin 
- [ ] High inflation rate means Government and Central Bank do some collective measures so that money can be taken out from the pocket of people, for this the keep increasing bank rate or you can say interest rate until unless inflation not countered , this all process is known as liquidity absorption and vice versa is also true
Effect on currency:
Notably if inflation is increasing then that becomes evidence that Bank create going to increase which in town strengthen the returns on bonds yields and securities due to which that particular currency get strengthen
- [ ]         That's why whenever CPI comes and comes positive then sentiment of buyers float towards dollar due to which that particular currency even strengthen and gains momentum
CPI AND FOMC RELATION:-
WE WILL DISCUSS IN DETAIL ABOUT FMC IN OTHER DEDICATED BLOG AND ARTICLE
- [ ] If you are a trader and closely monitoring the CPI and FOMC news event, then it is important you to establish a relation between CPI and FOMC
- [ ] You may heard that FOMC is an important event in which fed chair person announces the rates whether they are getting decrease or increase or it has been kept unchanged , ab to sab accident we can speculate the FOMC outcome on the basis of CPI 
HOW : -
AS WE ALREADY DISCUSSED THE OUTCOME OF CPI AND HOW THIS OUTCOME GOING TO AFFECT THE INTEREST RATE DECISION SO LET US UNDERSTAND THE MECHANICS CASE BY CASE
CASE -1 
IF CPI DATA COMES POSITIVE OR INCREASED  ,THEN BANK RATE GOING TO BE INCREASE TO COUNTER THE EFFECT OF INFLATION 
CASE-2 
IF CPR DATA COMES NEGATIVE OR DECREASE AND THAT MEANS INFLATION IS DEPLETED DUE TO WHICH CENTRAL BANK GOING TO DECREASE THE BANK RATE MOST LIKELY 
SO THIS IS IN NUTSHELL ABOUT CPI