Key points
- Often viewed as a better signal of persistent inflation pressure.
- Central banks watch core measures closely when setting policy.
- Typically runs below headline inflation when energy prices spike.
Example
If headline CPI rises 5% but energy prices jumped 20%, core CPI might show only 3%, a better guide to underlying inflation.
In history
By June 2023 US headline CPI inflation had fallen from 9.1% to 3%, but core was still about 4.8%. The Fed kept rates high because core was falling much more slowly.
Related terms