What is the meaning of Core Inflation?

Core Inflation is a reflection of a long-term inflationary trend in the economy. Many items which exhibit highly volatile price movements are excluded as it focuses only on long-run inflation and all the short-term price volatility so all other temporary changes have to be removed.  It is calculated by Consumer Price Index as latter removes the products both in energy and food sectors which are prone to temporary shocks as latter can give the false reflection of inflation. It is also calculated by the Outliers method which eliminates all the products which show high price changes.

 

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