Level 1 — Absolute Beginner
Every month, the government checks how much prices are going up. This is called inflation.
On August 12, the government will share the newest inflation numbers for July.
Investors are waiting to see the numbers. The numbers can affect how much people pay to borrow money.
On Tuesday, stock prices went down a little. This happened because of worry about Iran and higher oil prices.
- government
- the group of people who lead and manage a country
- inflation
- a general rise in prices over time
- investor
- a person who puts money into stocks or businesses hoping to earn more money
- stock
- a small share of ownership in a company
- borrow
- to take money and promise to pay it back later
- oil price
- the cost of buying oil
- worry
- a feeling of fear about something that might happen
- report
- a document that gives information about something
Level 2 — Elementary
US stock futures held mostly steady on Wednesday, August 12, as investors waited for the government's July inflation report, due at 8:30 a.m. Eastern time.
Economists expect the report to show that prices cooled slightly compared to June, with the yearly inflation rate dropping from 3.5 percent to about 3.4 percent.
The report matters because it could influence what the Federal Reserve does at its next meeting on September 16. Markets are currently split evenly between a small interest rate cut and a bigger one.
On Tuesday, stocks slipped as tension between the US and Iran continued and oil prices climbed above 83 dollars a barrel, adding to worries about higher costs across the economy.
- futures
- financial contracts that predict where stock prices will move before markets open
- economist
- an expert who studies how money, prices, and trade work
- yearly inflation rate
- how much prices have risen compared to the same time one year earlier
- Federal Reserve
- the central bank of the United States, which sets interest rate policy
- interest rate
- the cost of borrowing money, shown as a percentage
- tension
- a state of strained or difficult relations between groups
- barrel
- a standard unit used to measure amounts of oil
- economy
- the system of producing, buying, and selling goods and services in a country
Level 3 — Intermediate
US stock futures were little changed early on Wednesday, August 12, as traders positioned themselves ahead of the Bureau of Labor Statistics' July Consumer Price Index report, scheduled for release at 8:30 a.m. Eastern time.
Economists polled ahead of the release expect headline inflation to ease modestly, to roughly 3.4 percent year over year from 3.5 percent in June, while core inflation, which strips out volatile food and energy prices, is forecast to tick down to around 2.5 percent.
The report carries outsized weight because it is one of the last major data points before the Federal Reserve's September 16 decision, with markets currently pricing in roughly even odds between a modest quarter-point rate cut and a larger half-point reduction.
Tuesday's session offered a preview of the crosscurrents at play: the Dow, S&P 500, and Nasdaq all slipped as the standoff between the US and Iran over the Strait of Hormuz dragged on and crude oil pushed above 83 dollars a barrel, a combination that has kept investors wary of assuming inflation pressures are fully behind them.
- position
- to arrange one's investments in preparation for an expected event
- headline inflation
- the overall inflation rate including all goods and services, without exclusions
- core inflation
- an inflation measure that excludes volatile categories such as food and energy
- volatile
- likely to change quickly and unpredictably
- outsized
- larger than expected or usual
- price in
- to already reflect an expected future event in current market prices
- crosscurrent
- an opposing trend or force that works against another one
- wary
- cautious about possible problems or dangers
Level 4 — Advanced
US equity futures traded within a narrow band early Wednesday, August 12, as market participants braced for the Bureau of Labor Statistics' July Consumer Price Index release, due at 8:30 a.m. Eastern, a data point widely regarded as the single most consequential input into the Federal Reserve's rapidly approaching policy deliberations.
Consensus estimates point to a modest deceleration in headline inflation, to roughly 3.4 percent year over year from June's 3.5 percent, alongside a marginal softening in the core measure, which excludes volatile food and energy components, to somewhere near 2.5 percent, a trajectory economists broadly characterize as consistent with continued, if uneven, disinflation.
The stakes are amplified by the report's proximity to the Fed's September 16 meeting, ahead of which futures markets currently assign roughly even probability to a conventional quarter-point cut versus a more aggressive half-point reduction, leaving Wednesday's print with unusual power to tilt the balance in either direction.
Tuesday's trading session underscored the fragility of the current calculus: all three major indices retreated as the unresolved standoff between Washington and Tehran over the Strait of Hormuz persisted and crude oil climbed past 83 dollars a barrel, a reminder that geopolitically driven energy costs remain capable of complicating an otherwise encouraging disinflationary narrative.
- consequential
- having significant effects or importance
- deliberation
- careful consideration or discussion before making a decision
- deceleration
- a slowing down in the rate at which something is increasing
- trajectory
- the path or course something follows over time
- disinflation
- a slowdown in the rate of inflation, without prices actually falling
- proximity
- nearness in time, space, or relationship
- calculus
- a careful, often complex, assessment of a situation used to guide a decision
- geopolitically
- relating to politics as influenced by geographic and international factors