Pro Tip
- The CPI is a leading indicator for FED monetary policy.
- And the PPI is a leading indicator for the CPI.
Why Producer Price Index (PPI) Is Important?
Inflation factors are probably the second-most-watched indicator after unemployment data, as it helps investors deduce the future direction of monetary policy.
However this can be considered a backwards approach as inflation is generally considered a leading indicator and unemployment is considered a lagging indicator.
The core PPI can serve multiple roles in improving investment-making decisions because it can serve as a leading indicator for CPI.
BOTTOM LINE:
- The CPI is a leading indicator for FED monetary policy.
- And the PPI is a leading indicator for the CPI.