I’ve been looking for a reasonable explanation for this for a while and literally cannot find one. SO help me understand, please. ❤️🤷♀️
In: 42
Adding to what others have said here, there is a reason to take out volatile items. If you are looking at long term inflation, say last year versus the prior year, then the volatility doesn’t cloud your analysis, So you look at inflation measures that are broad and include everything.
But if you want to know if inflation this month is higher, when the data comes out in a couple of weeks, then it makes sense to strip out the volatile items. The number is more likely to reflect the actual trend.
The volatile items move both ways. Take food. Leaving out the issue as to whether the egg companies are conspiring to keep egg prices high (that is possible based on research I have read) food prices bounce around due to short term market forces. This has always been true, just bigger variance around a trend.
But it is nice to know both numbers. If the core inflation number is +5.0% but the inflation number with all the volatile components is 7.0%, I want to know why the volatile components are so high. Take those eggs. I would have a point of view as to whether the price situation will resolve itself and so maybe the higher number shouldn’t be an issue in looking at March.
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