For decades, the equity and debt markets struggled with widely varying rates of inflation that at times put the entire economy in jeopardy. Once again, the potential for rising inflation and interest rates is on investor’s minds.
The Consumer Price Index (CPI) is the most commonly referenced inflation gauge, which measures price changes in eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other
goods and services), as well as various government-imposed user fees.
Consumers have a simple way to measure inflation. They go shopping.
Stopping at a grocery store or a gasoline station makes it abundantly clear that prices
for a wide range of goods have increased. The items at these two locations, however, tend to be volatile, which is what prompts most economists to pay more attention to the core CPI, which measures price changes for a typical basket of goods, except
food and energy.