While everyone is watching how inflation is doing, more types of inflation determine how the economy is actually performing. Before diving into more details, let’s first break down what it is.
Core inflation explained
Core inflation measures change in prices for goods and services, but exclude prices for those in the food and energy industries. These items are not included in the general inflation metric because of how much more volatile their prices are.
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Most of the time, it is calculated through the consumer price index (CPI), which measures the price of goods and services. The combination of the core personal consumption expenditures (PCE) index and the CPI measures core inflation. The PCE serves as a gauge of consumer spending on goods and services in the US.