key definitions
- headline cpi
- headline consumer price index includes food and energy. it is volatile month to month but it is what households feel first.
- core cpi
- core cpi strips food and energy to highlight stickier categories like shelter and services.
- pce deflator
- the pce price index is the fed's preferred gauge; weights differ from cpi, so the two can diverge meaningfully.
- supercore
- supercore usually refers to services inflation excluding food, energy, and shelter — a rough read on labor-intensive price pressure.
investors love to argue about one inflation print. the institutions that matter for markets — the fed, Treasury borrowing, wage bargaining — use different slices. headline grabs cable news. core and supercore guide policy patience. pce frames the actual mandate tracker.
inflation shocks travel through equities unevenly. energy and materials can rally on supply-driven price spikes while consumers retrench. financials benefit from a steeper curve until credit breaks. high-multiple growth sells off hardest when real rates rise to meet the shock.
early-1990s supply and recession
inflation was elevated into the gulf shock, then eased as growth softened.
- economyrecession and job losses took pressure off overheating narratives.
- fedeased as unemployment rose, even with inflation still annoying.
- marketcyclicals lagged until policy credibility returned.
supply shocks can raise headline inflation just as demand collapses — equities need to know which force is dominant.
headline CPI inflation averaged above 5% in 1990 before stepping down through the recovery.
BLS CPI; FRED CPIAUCSL
great moderation
inflation oscillated in a band that made 2% feel like gravity existed.
- fedpreemptive hiking and credible anchors kept expectations bounded.
- economyglobal labor supply and tech investment held unit costs in check.
- marketmultiple expansion flourished until housing credit cracked.
low inflation volatility rewards duration until credit excess builds underneath.
annual CPI inflation spent much of the 2000s between roughly 2% and 3%.
BLS CPI
crisis and deflation scare
demand collapsed; headline inflation briefly printed negative on an annual basis.
- economyhousing wealth imploded, credit spreads blew out.
- fedQE and zero rates to reflate demand.
- marketquality and cash flow won; commodities and small caps cratered.
when inflation collapses with demand, the risk is not 'hot prices' — it is earnings and employment.
year-over-year CPI dipped negative in 2009 before rebounding into 2010.
BLS CPI
lowflation decade
inflation rarely challenged the fed's ceiling; curves flattened and equities climbed.
- fedstopped hiking once inflation consistently undershot in pockets.
- economyslow healing, weak capex, global goods disinflation.
- marketgrowth stocks dominated as real yields stayed contained.
persistent undershooting breeds dovish policy — until fiscal or supply shocks break the template.
core measures often ran close to but below the fed's later 2% average target framework.
FRED PCEPI
pandemic goods inflation
fiscal transfers plus supply bottlenecks drove the fastest goods inflation in a generation.
- economyservices collapsed, then reopened into shortages.
- fedcalled transitory, then chased with aggressive hikes.
- marketvalue and energy led early; duration crashed in 2022.
when inflation is supply-led and broad, margins and multiples both compress without help from policy.
year-over-year CPI climbed into the high single digits by 2022 before peaking.
BLS CPI
disinflation
goods pressure faded; services and shelter became the debate.
- fedheld higher for longer, then eased as data cooperated.
- economylabor market cooled without an immediate hard landing.
- marketrates volatility fell; growth equities partially repaired.
the last mile of disinflation is often the slowest — and the most important for cuts pricing.
headline CPI drifted back toward the low single digits by 2024–2026 in the baseline narrative.
BLS CPI
treat inflation data as a regime signal, not a lottery ticket. persistent core pressure forces the fed to keep policy tight even when headline cools on base effects. disinflation without employment damage is the bullish Goldilocks path markets constantly price and rarely get.
when updating this page, ask: is the surprise in goods or services, domestic or global, wage-led or margin-led? the answers dictate whether margins compress at the index level or simply rotate between sectors.