The Consumer Price Index (CPI) tracks the change in price of a basket of goods and services over a given period of time. It's the primary measure of inflation, and the U.S. Federal Reserve aims to keep the index growing by around 2% each year.

The Fed will adjust the federal funds rate -- the nation's benchmark interest rate -- if inflation swings too far above or below its target, which can directly affect consumer spending, corporate profits, and the prices of assets like stocks, bonds, and real estate.

The CPI soared to a 40-year high in 2022, which prompted the Fed to aggressively hike interest rates. It appears to be working, because inflation cooled significantly in 2023, and it continues to trend lower this year.

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Source Fool.com