- Basis point (bp)
- A unit for measuring small changes in interest rates or yields. One basis point equals 0.01% — so 100 basis points equals 1%. If a rate moves from 4.25% to 4.50%, that's a 25 basis point move. Traders use this instead of percentages because it avoids confusion when rates are already small.
- Bear market / correction
- Both describe a stock market decline, just different sizes. A correction is a drop of 10% or more from a recent high. A bear market is a drop of 20% or more. Corrections happen fairly often; bear markets are rarer and usually reflect more serious concerns.
- Bear steepening / bull steepening
- Two different ways a yield curve can go from flat back to its normal upward slope. Bull steepening happens when short-term rates fall, usually because the Fed is cutting — generally a "good" signal. Bear steepening happens when long-term rates rise instead, often because investors are demanding more compensation for inflation risk or heavy government borrowing — a less comfortable version of the same shape change.
- Core CPI vs. headline CPI
- Headline CPI measures the price change of everything in the basket — food, energy, housing, all of it. Core CPI strips out food and energy specifically, because those two categories swing wildly month to month (a hurricane spikes gas prices, a bad harvest spikes egg prices) without necessarily saying much about broader inflation. Economists often watch core CPI more closely because it's a steadier read on the underlying trend.
- Dot plot
- A chart the Fed publishes quarterly showing where each individual Fed official personally expects interest rates to be over the next few years — literally one dot per official. It's one of the more direct windows into what the Fed is actually thinking, even though it's not a formal promise.
- Federal funds rate
- The interest rate the Fed sets that controls how much it costs banks to borrow money overnight from each other. It's the Fed's main lever — raising it makes borrowing more expensive everywhere, which is meant to slow spending and cool inflation; lowering it does the opposite.
- FOMC (Federal Open Market Committee)
- The actual group of people inside the Fed who vote on interest rate decisions. When you hear "the Fed meets next week," it's the FOMC doing the meeting — they gather about eight times a year to decide on rates.
- Forward guidance
- When the Fed tells markets in advance roughly what it plans to do with rates, to help everyone plan ahead and avoid market shocks. Not every Fed Chair uses it the same way — some lean on it heavily, others prefer to stay purely reactive to incoming data instead of pre-committing.
- Free cash flow
- The actual cash a company has left over after paying for its operations and investments — money it could theoretically return to shareholders, pay down debt, or save. Negative free cash flow means a company is spending more cash than it's bringing in.
- Hawkish / dovish
- Shorthand for how aggressive the Fed sounds on fighting inflation. "Hawkish" means leaning toward higher rates and staying tight for longer, prioritizing inflation control even at the risk of slowing growth. "Dovish" means leaning toward lower rates and easing sooner, prioritizing growth and jobs even at the risk of letting inflation run a bit hotter.
- Leverage
- Borrowing money to make a bigger bet than you could with just your own cash. If you put down $10 of your own money and borrow $90 more to make a $100 investment, that's 10x leverage — it multiplies gains, but it multiplies losses just as fast.
- Margin call
- When an investor who borrowed money to invest sees their investments lose enough value that their lender demands more cash or collateral immediately, or the lender will forcibly sell the investor's assets to cover the loan. It's often the actual mechanism that turns a bad month into a forced, fire-sale collapse.
- Owners' equivalent rent (OER)
- The largest single piece of the CPI shelter category. Since most homeowners don't pay rent, the government estimates what a homeowner's house would rent for on the open market, and uses that as a stand-in for their housing cost. It's a big chunk of the entire CPI basket, which is part of why housing costs have such an outsized effect on inflation readings.
- PCE (Personal Consumption Expenditures)
- The Fed's actual preferred inflation gauge — not CPI. PCE and CPI usually move together but aren't identical; PCE adjusts more for the fact that people substitute cheaper alternatives when prices rise (e.g., switching from beef to chicken), so it tends to run a bit lower than CPI. When the Fed says its 2% target, it means 2% PCE inflation, not CPI.
- Purchasing power
- How much stuff a given amount of money can actually buy. Inflation erodes purchasing power over time — the same amount of money buys less at the store than it did a few years ago.
- Quantitative tightening (QT)
- A central bank shrinking its balance sheet by letting bonds mature without reinvesting, quietly pulling money out of the system.
- Real vs. nominal
- Nominal is the plain dollar figure — your paycheck, a price tag, an interest rate — with no adjustment for inflation. Real means that same figure adjusted for inflation, showing what it's actually worth in terms of purchasing power. A 3% raise sounds good nominally, but if inflation was 4% that year, your real pay actually went down.
- Sticky vs. flexible prices
- Some prices change constantly (gas, groceries — "flexible") while others barely move for months or years at a time (rent, cable bills, insurance — "sticky"). Sticky-price inflation is slower to rise but also slower to fall, which is part of why inflation can stay elevated even after the flashy, fast-moving prices have cooled off.
- Treasury (bill, note, bond)
- All three are loans to the U.S. government, just different maturities. Treasury bills mature in a year or less, notes run 2–10 years, and bonds stretch out to 20–30 years. Longer maturities usually pay higher yields.
- Yield curve
- A chart plotting interest rates across different Treasury bond maturities (2-year, 10-year, 30-year, etc.). Normally it slopes upward, since lenders want more compensation for lending money for longer. When it flattens or inverts, it's historically been read as a warning sign about the economy.
- Hard landing
- When the Fed successfully brings inflation back down, but only by slowing the economy so much that it tips into a recession. Think of it like slamming the brakes to avoid running a red light — you stop in time, but everyone in the car lurches forward. Job losses and a shrinking economy are the price paid for getting inflation under control.
- Soft landing
- When a central bank slows inflation without tipping the economy into recession. Rare, as achieving both requires extreme precision paired with an insane amount of luck and the reason macro people argue so much. Luck is required because interest rate moves take time to happen and many events may happen in that time frame.
- No landing
- When the economy just... doesn't slow down. Growth stays strong, people keep spending, and unemployment stays low — but inflation doesn't cool off either, despite the Fed trying to slow things down. It sounds like the best of both worlds, but it's not a stable place to be — it usually just means the "real" landing (soft or hard) hasn't happened yet, it's only been delayed, usually with a bigger impact happening the more time in no landing.