The economy
Core inflation
Inflation excluding food and energy prices, used to see the underlying trend.
How it works
Food and energy swing on weather, harvests and geopolitics. Removing them gives a steadier signal of whether price pressure is broad-based.
Policymakers respond to core because they can influence demand and cannot influence an oil embargo.
Where it misleads people
Households buy food and energy. Core inflation is the right measure for setting policy and the wrong one for describing how much worse off someone feels.
Related terms
- Consumer price indexThe main official measure of inflation, tracking the price of a fixed basket of goods and services.
- InflationThe rate at which prices rise, which means the rate at which each pound or dollar buys less.
- Central bankThe institution that sets a country’s benchmark interest rate and manages its money supply.
More in The economy
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