Core inflation

Definition

Core inflation is a measure of inflation that excludes items that undergo volatile seasonal price movements, such as food and energy sources. It is computed by measuring the fractional change in a version of a consumer price index that excludes food and energy sources.

Over a short time frame, core inflation may differ significantly from the overall inflation rate (computed using the full CPI). However, over a longer time frame, the core inflation rate and overall inflation rate may be very close, (questionable: because long term changes in the prices of food and energy sources would also be reflected in the prices of other goods through their indirect effects on production processes.)