Core Inflation. This is a measure of inflation which excludes certain volatile and seasonal prices.
It will be based on the Consumer price index but exclude prices such as
- Petrol (subject to oil price variations)
- Food (subject to seasonal variations)
Core inflation will also exclude the impact of government excise duties.
Core inflation is seen as an important guide to long term inflation trends. however, if fuel price increases last for a while they can affect core inflation by raising price expectations.
However, core inflation can be misleading for consumers, who will mistrust figures which exclude many prices they have to pay for.
This graph shows core inflation in the Eurozone compared to the ‘headline’ HICP (Harmonised consumer price index)
Example Core Inflation
Useful addition for: ECB v Bank of England post