Core Inflation
Core inflation measures price changes excluding food and energy, whose prices are volatile, to reveal the underlying trend of inflation.
Food and energy prices can jump or fall sharply because of weather, geopolitical events or supply shocks, and these moves often reverse. Stripping them out gives a steadier view of how prices are changing across the rest of the economy, such as rent, services and goods.
In the US, the two most watched measures are core CPI from the Bureau of Labor Statistics and core PCE from the Bureau of Economic Analysis. The Federal Reserve pays particular attention to core PCE when judging whether inflation is moving toward its 2% goal.
Core inflation does not mean food and energy are unimportant to consumers; they matter a great deal for household budgets. The core measure is simply a tool for forecasting where overall inflation is heading.
Example: if gasoline prices spike for a few months, headline CPI may rise sharply while core CPI stays steady, suggesting the jump may be temporary. If core inflation rises too, price pressures are likely broader and more persistent.