US Core CPI: A key inflation indicator for the economy and markets

US Core CPI: A key inflation indicator for the economy and markets

The Core Consumer Price Index (CPI) in the US is one of the most important indicators of inflationary pressure, directly influencing the Federal Reserve's interest rate decisions, the dollar's dynamics, and stock markets.
This indicator excludes the most volatile components—food and energy—making it a more reliable benchmark for analyzing long-term inflation trends.

What is Core CPI and how does it differ from General CPI?

CPI (Consumer Price Index) is a consumer price index that records changes in the cost of a consumer basket.

Core CPI is an indicator that excludes food and energy, which are subject to strong short-term fluctuations.

Thus, the Core CPI provides a “cleaner” picture of core inflation, reflecting the stability of prices in the housing, healthcare, education, and services segments.

The Importance of Core CPI for the Fed and Monetary Policy

When assessing inflation risks, the US Federal Reserve System (FRS) focuses on the core CPI and the personal consumption expenditures price index (Core PCE) .

Core CPI growth above expectations → increases the likelihood of monetary policy tightening and rate hikes.

Slowing Core CPI → signal of possible policy easing and rate cuts.

Example: In September 2025, the US Core CPI rose by 0.3% m/m and 3.6% y/y , slightly above forecasts (0.2% and 3.5%). This caused 10-year Treasury yields to rise to 4.52% and the dollar to strengthen against the euro and yen.

US Core CPI: A key inflation indicator for the economy and markets

Core CPI and its impact on markets

Foreign exchange market (Forex)

Strong Core CPI → supports the US dollar (DXY rises).
Weak Core CPI → reduces the attractiveness of the dollar.

Stock market

High core inflation → pressure on stocks, especially in the tech and growth sectors.
Lower inflation → positive for the stock market.

Bonds

Rising Core CPI → rising government bond yields.
Slowdown → decrease in profitability.

Data and Statistics (USA, Fall 2025)

Core CPI (August 2025): +0.3% m/m, +3.6% y/y
Headline CPI: +0.5% m/m, +3.9% y/y (up due to jump in oil and food prices)

The main drivers of Core CPI growth were: housing rent (+0.4%), medical services (+0.5%), and car insurance (+1.1%).

Why Core CPI Matters to Investors

Forex traders monitor the release of the Core CPI to develop short-term strategies.

Stock investors assess risks for growth companies.

Bond markets react to Fed expectations.

Analytics and forecast

According to forecasts from Goldman Sachs and Morgan Stanley, core inflation in the US could slow to 3.2% y/y by the end of 2025 amid a slowdown in rent growth and stabilization of service prices.

However, risks remain:

possible increase in prices for medicine and insurance,
persistently high demand for rental housing,
wage pressure.

The US Core CPI is a key indicator that shapes interest rate expectations and determines sentiment in the currency, stock, and debt markets. For investors and traders, it is an important benchmark when making decisions.

Written by Ethan Blake

Independent researcher, fintech consultant, and market analyst.
September 25, 2025

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