Principles of Macroeconomics / Unit 6 MAC 0509 short lesson, about 20 seconds
Core Inflation
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The idea
Core inflation leaves out the most volatile items, chiefly food and energy, to show the underlying trend rather than the month-to-month noise.
In practice
A spike in fuel prices moves headline inflation and leaves core inflation alone.
Where people slip
Core is not the inflation households feel, since they buy food and fuel. It is a guide to policy, not a cost-of-living measure.
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