Core CPI

Core Consumer Price Index (CPI) is a measure of inflation that excludes certain volatile items, and that's almost always food and energy prices. The idea behind using core CPI is that these items can have large fluctuations in prices due to factors such as weather, natural disasters and geopolitical tensions, which do not necessarily reflect underlying inflationary trends. By excluding these items, the core CPI provides a more stable and reliable measure of underlying inflation.

The specific items that are excluded from the core CPI can vary depending on the agency that calculates it, but typically it excludes items such as food and energy prices, as well as other volatile components such as fruits and vegetables, gasoline, heating oil, and natural gas.

Core CPI is used as a complementary measure to the headline CPI. The headline CPI gives an overall picture of the price level, while core CPI gives an idea of underlying inflationary trends. Central Banks such as the Bank of Canada and the Federal Reserve also look at the core CPI along with other economic indicators to make monetary policy decisions.

The core CPI is often considered as a more accurate measure of inflationary trends since it excludes the volatile items and gives a clearer picture of underlying inflation. However, it is important to note that excluding some items could lead to missing important information on overall price changes. Thus, it is important to look at both headline and core CPI together to get a more complete picture of inflation.