What is the import price index?

The import price index, published monthly by the Bureau of Labor Statistics, measures the rate of change in prices of goods and services purchased by US residents from foreign sellers. It captures the external inflation channel, showing how global commodity prices, exchange rate movements, and foreign production costs flow into the domestic economy through trade.

Petroleum imports often dominate the headline import price reading because oil is the largest single category by value. Analysts therefore focus on the "import prices excluding petroleum" measure for a cleaner signal of underlying external price pressures. Non-petroleum import prices reflect the cost of manufactured goods from trading partners like China, the EU, Japan, and Mexico, as well as global food and industrial commodity prices.

The US dollar plays a central role in determining import prices. When the dollar strengthens against foreign currencies, imported goods become cheaper in dollar terms, putting downward pressure on domestic inflation. When the dollar weakens, the opposite occurs. This exchange rate pass-through is typically partial and occurs with a lag, as foreign exporters absorb some of the currency impact in their margins. Economists estimate that a 10% broad dollar appreciation reduces import prices by roughly 3-5% over the following year.

For Federal Reserve policymakers, import prices represent an inflation channel that is largely beyond their direct control. Tariff increases, global supply chain disruptions, and commodity price spikes all transmit through import prices. During the 2021-2022 inflation surge, soaring import prices for energy and goods contributed significantly to CPI. The subsequent decline in import prices through 2023 and 2024 supported the disinflation process. Tracking the import price index helps forecasters separate domestically generated inflation from externally imported price pressures, which is critical for calibrating the appropriate monetary policy response.