1. What is Core Inflation?

Core inflation represents the long-term trend in the price level of goods and services, excluding food and energy prices which are typically more volatile. It provides a clearer picture of underlying inflation trends.

2. How Does the Calculator Work?

The calculator uses the Core Inflation formula:

Where:

• All Items — Overall inflation rate including all categories
• Food — Inflation rate for food items
• Energy — Inflation rate for energy products

Explanation: By removing the volatile food and energy components, core inflation provides a more stable measure of price trends.

3. Importance of Core Inflation

Details: Central banks and policymakers use core inflation to make decisions about monetary policy as it better reflects long-term inflation trends without short-term volatility.

4. Using the Calculator

Tips: Enter the inflation rates for All Items, Food, and Energy as percentages. The calculator will compute the core inflation rate by subtracting food and energy from the overall rate.

5. Frequently Asked Questions (FAQ)

Q1: Why exclude food and energy from inflation calculations?
A: Food and energy prices tend to be more volatile due to weather, geopolitical events, and other temporary factors that don't reflect long-term inflation trends.

Q2: How often is core inflation calculated?
A: Most countries calculate core inflation monthly along with their regular inflation reports.

Q3: What's a typical core inflation rate?
A: Most central banks target 2% inflation, though this varies by country and economic conditions.

Q4: Are there other measures of core inflation?
A: Yes, some measures exclude different components or use statistical methods to identify and remove outliers.

Q5: How does core inflation affect interest rates?
A: Central banks often adjust interest rates based on core inflation to maintain price stability and economic growth.