Core CPI
Core CPI measures consumer price inflation excluding volatile components such as food and energy.
Meaning in Practice
Core CPI removes short-term price fluctuations to provide a clearer view of underlying inflation trends. It is calculated using the same basket as the headline CPI but excludes specific categories. Policymakers use it to assess persistent inflation pressures.
Why It Matters
Core CPI is considered a more stable indicator of medium-term inflation dynamics. Central banks often rely on it when setting interest rates. Sustained increases may signal structural price pressures.
Market Impact
Higher core inflation can strengthen expectations of tighter monetary policy and lift bond yields. Lower readings may ease rate hike concerns and support risk assets. Currency markets respond to deviations from forecasts.
Example
If headline inflation is high due to energy prices but core CPI remains stable, underlying inflationary pressure may be limited.