Core inflation

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Core inflation is a type of inflation measure which seeks to represent the underlying long-run trend of aggregate price levels in the economy. This is achieved by removing certain items exhibiting short-term significant price fluctuations within the overall consumer basket (as typically measured by the headline Consumer Price Index or other relevant price indices). Core inflation is thus intended to be an indicator and predictor of underlying long-term inflation.

The most common approach in accomplishing this is by excluding items frequently subject to volatile price movements, like food and energy. Every country maintains its own calculation of its official core inflation figure and usually reported as complementary to the overall headline inflation by most national statistical agencies. Throughout the years, econometricians have likewise devised alternative approaches in computing core inflation using more formal methodologies.