Core inflation vs. headline inflation

If you look at the core consumer price index, you’ll see changes in the price of goods and services, excluding food and energy. The core CPI is a key means for economists and policy makers to measure changes in purchasing trends and inflation. But some wonder why they would use core inflation rates when food and energy prices are what most consumers feel the most. It may seem disingenuous to remove such critical economic pieces from the equation, but volatility makes it tricky to depend on the projections they generate. Food and energy prices tend to fluctuate far more than most goods and services. With prices up one month, down the next, and then on the rise again, headline inflation isn’t very good to use for short-term projections. Policymakers and economists prefer to use headline inflation because it’s a more consistent long-term representation of what is really happening with inflation.

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