The only major difference between CPI and Core CPI is that CPI is more volatile than Core CPI. This is why, for the purposes of year on year changes, Core CPI is usually reported. If we didn't do this, we'd get headlines like "OMFG, massive inflation, we are all doomed" followed by "OMFG, massive deflation, we are all doomed" 6 months later. Over a period of a year or two, massive inflation x massive deflation = small but stable inflation.
A better way to go would be to use moving averages, but that's too complicated to explain to reporters.
> A better way to go would be to use moving averages, but that's too complicated to explain to reporters.
Yes, MA is the first thing that came to mind when reading your big paragraph. It would be a real shame if journalistic incompetency truly is the reason we have not adopted it.
Fair enough; a misnomer on my part. However, it's disingenuous to tell the US consumers that the core inflation is 1.2%, when their gas price has doubled (from 2009)
http://research.stlouisfed.org/fred2/series/CPIAUCSL
http://research.stlouisfed.org/fred2/series/CPILFESL
The only major difference between CPI and Core CPI is that CPI is more volatile than Core CPI. This is why, for the purposes of year on year changes, Core CPI is usually reported. If we didn't do this, we'd get headlines like "OMFG, massive inflation, we are all doomed" followed by "OMFG, massive deflation, we are all doomed" 6 months later. Over a period of a year or two, massive inflation x massive deflation = small but stable inflation.
A better way to go would be to use moving averages, but that's too complicated to explain to reporters.