What Is Core Inflation?

Core inflation refers to the inflation after excluding some goods or services with large price changes and frequent or short-term price fluctuations. It is expressed in core CPI. The measurement of the inflation rate is often defined by a series of representative commodity price fluctuations.

Core inflation

The common practice in foreign countries generally divides the rise in prices into two parts. Core inflation is one of them, and core inflation is

In foreign countries, there are two criteria for the selection of these commodities. One criterion is to select and design weights according to the proportion of commodity transactions in the entire economic life. This is what we generally call the inflation rate.

Another criterion is defined according to the basics of commodities in economic life and in our daily lives. This is called core

The methods used by governments and research institutions to measure core inflation are mainly divided into two categories: a behavioral approach and a statistical approach.

The former expresses the long-term trend of prices by eliminating certain items in the CPI basket; the latter avoids the subjectivity of the elimination process by eliminating temporary price fluctuations.

First, the behavior method is also known as the exclusion method. The exclusion method is the most commonly used core inflation measurement method. Its benefits are that the operation method is intuitive and transparent, easy to understand by the public, easy to repeat inspection, and timely. The core method for measuring core inflation is to exclude specific types of goods or services from the CPI basket of goods and services, and use the prices of surplus goods and services to compile and measure core inflation-based measures.

The difference between inflation and core inflation is that the latter does not include food, energy, tobacco and alcohol, while the former does.