Core inflation
Also written: underlying inflation
Inflation measured with food and energy stripped out, because those two swing violently for reasons monetary policy cannot touch.
The headline inflation rate covers everything a household buys. Food and fuel prices move sharply with weather, harvests and geopolitics, which can hide the underlying trend in a single month.
Core inflation removes them to show what is happening to prices more broadly. Central banks watch it because it responds to interest rates in a way that the oil price does not.
Neither measure is the truer one. Households pay the headline rate; policymakers steer by the core.
Headline inflation came in at 3.4 percent over twelve months, with core at 2.5 percent. The gap is largely energy, which is why a rebound in the oil price threatens to reverse the improvement.
See also
This definition is part of the EPTA5 lexicon, written so that a reader who does not work in finance can follow our market notes without stopping. It is general information and not investment advice. Read the notes.