Core inflation

A variant of a headline price index such as the consumer price index, computed over the same basket with a stated set of items excluded. The exclusions are conventional rather than derived: food and energy are removed in most regimes because their prices move on weather, harvests and supply disruptions that reverse, and a monetary authority acting on a reversal would be acting on nothing.

The rationale is signal rather than accuracy. Nobody claims a household does not buy food and fuel, and headline inflation is the measure that describes what a household actually pays. Core is published alongside it as an estimate of the part of the movement likely to persist, which is the part a policy decision taken today can still be affecting in a year's time.

The method is genuinely disputed. A fixed exclusion list removes items that were volatile historically rather than items that are volatile in the month being measured, so alternatives exist: trimmed means discard the largest movers in each direction whatever they are, and a median measure takes the middle of the distribution. No approach has settled the argument, which is why several are published side by side, and why a central bank tends to cite more than one.