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by DidYaWipe
504 days ago
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Inflation rate of what? Inflation can be measured against different "market baskets." Consider this huge defect in the commonly-cited one: "Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors. Food and energy prices are exempt from this calculation because their prices can be too volatile or fluctuate wildly." - https://www.investopedia.com/terms/c/coreinflation.asp And yet the cost of food is probably the most often-cited one in any news story about inflation... unless the winner is the other statistically-omitted one, fuel. |
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There are multiple types of CPI because they measure different things, and they each have pluses and minuses.
The reason why Core CPI is useful is illustrated by the orange and blue lines in the first graph:
* https://www.economicshelp.org/blog/2587/inflation/difference...
Good luck trying to policy with the orange (non-Core, which has food and energy) line. Or the red line in Chart 1 of:
* https://www.frbsf.org/research-and-insights/publications/doc...
Food and energy are heavily dependent on commodity prices, which can swing widely: one month the Fed would be cutting by 3% and the very next month raising by 4% if they followed non-Core CPI (versus PCE).
The Bank of Canada, who sets rates in Canada based on StatCan data, looks are three different CPI measures:
* https://www.bankofcanada.ca/rates/indicators/capacity-and-in...
* https://www.statcan.gc.ca/en/statistical-programs/document/2...