Core CPI

RECENT NEWS
Forbes  Feb 14  Comment 
Today's very high Core CPI result is one more indication that inflation is rising.
The Economic Times  Feb 14  Comment 
Fed has forecast three rate hikes for this year, with the first increase expected in March.
Channel News Asia  Jan 12  Comment 
Underlying U.S. consumer prices recorded their largest increase in 11 months in December amid strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will accelerate this year.




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Core Consumer Price Index (CPI) is equal to CPI minus energy and food prices and is used to measure core inflation. The reason behind excluding energy and food prices is because the prices of these goods can be very volatile. As a result, such wide fluctuations would unfairly distort the measure of inflation.[1]

Why is it important?

The Federal Reserves uses Core CPI to decide whether they should change Fed Funds rate or not. By excluding volatile energy and food prices, the Fed can get have a better idea if the rising prices of goods and services are caused by core inflation or by the volatile energy and food prices.[2]


References

  1. Business Dictionary: Core CPI
  2. About.com: US Economy
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