US FED inflation lens - CPI vs Core CPI YoY (FRED)

Description:

This chart overlays Headline CPI YoY and Core CPI YoY (both from FRED) on a single pane, showing the U.S. inflation trajectory in monthly % change. The script smooths the lines (optional) for trend clarity, adds 2% and 3% policy reference levels, and optionally shades the area between headline and core readings to highlight inflation mix shifts. It’s designed to be a macro trigger lens — giving traders an instant read on whether inflation is trending toward or away from central bank comfort zones.

Visual Cues & Why They Matter

1)

CPI & Core CPI Above 3%

Why: Historically a pressure point for tighter Fed policy and higher rates — risk-off for bonds and possibly equities.

Cue: Both lines above the orange dashed 3% line.

2)

CPI & Core CPI Falling Toward 2%

Why: Sign of inflation normalization; often coincides with dovish policy pivots, risk-on for equities.

Cue: Both lines approaching the teal dotted 2% line from above.

3)

Headline Above Core (Blue > Red)

Why: Indicates energy/food price shocks are driving inflation — these are volatile and can reverse quickly.

Cue: Blue area shading above red.

4)

Core Above Headline (Red > Blue)

Why: Suggests inflation is broad-based and sticky — harder for Fed to cut rates.

Cue: Red shading above blue.

5)

Crossovers Between Headline & Core

Why: Often marks shifts in the inflation narrative (e.g., energy-driven to broad-based, or vice versa).

Cue: Shading flips color.

6)

Slope / Momentum Changes

Why: Acceleration upward = inflation heating; acceleration downward = disinflation trend gaining strength.

Cue: Smoothed lines bending sharply up or down.