Homework answers / question archive / Economists sometimes exclude food and energy prices from the "headline" con- sumer price index and use the resulting "core" price measure to assess inflation prospects

Economists sometimes exclude food and energy prices from the "headline" con- sumer price index and use the resulting "core" price measure to assess inflation prospects

Economics

Share With

Economists sometimes exclude food and energy prices from the "headline" con- sumer price index and use the resulting "core" price measure to assess inflation prospects. For the period since 1990, plot on one graph the percent change from a year ago of the consumer price index (FRED code: CPIAUCSL) and the per- cent change from a year ago of the consumer price index excluding food and energy (FRED code: CPILFESL). Visually compare the variability of these two measures of inflation. Why might inflation excluding food and energy be a better predictor of future inflation than headline inflation? (L04)