What is CPI?

CPI (Consumer Price Index) is a figure that measures the change in prices of goods and services over time, indicating inflation. It is often used to adjust wages and salaries to align with rising prices and is also used as a measure of consumer purchasing power.

How does CPI relate to the stock market?

• If the CPI figure rises, it means inflation is also rising. Therefore, central banks often raise interest rates to reduce the severity of inflation.
• However, raising interest rates also negatively affects the stock market because it increases financial costs for some businesses.
• For example, the real estate market may slow down, but there are still some industries that benefit from rising interest rates, such as banking stocks.
• Conversely, if the CPI is low, central banks tend to use easing policies and adjust interest rates to a low level to stimulate the economy, resulting in a better economic outlook and giving the stock market a chance to respond positively.