Core Inflation

Core inflation is an inflation measure that seeks to capture the underlying long run trend in the general level of prices in an economy, most commonly by excluding food and energy prices because of how volatile they tend to be in the short term. Most countries calculate their official core inflation measure by excluding specific volatile items from a broader price index, though economists have also developed formal statistical methods for the same purpose. Central banks watch core inflation closely as a policy target because it strips out short term swings that monetary policy has little power to address, making it a more useful signal of persistent inflationary pressure than headline inflation alone.