"Core inflation" refers to the measure of inflation that excludes certain volatile or temporary factors, such as changes in food and energy prices. It focuses on the underlying price trends of everyday goods and services to provide a more stable and accurate reflection of long-term inflation levels.
Full definition
The annual
core inflation rate, however, remained flat at 1.8 percent, unchanged for the third month in a row.
In the past two months, however, the annualized rate
of core inflation has been 2.7 %.
Nevertheless, a decline in the cost of services reduced the annual rise
in core inflation to 0.9 %, its weakest reading in several months.
More recent readings
for core inflation suggest that we have been right at our 2 percent target for the past three and six months.
While
core inflation remains low at this stage, it is looking increasingly likely that the downward trend evident over the past year or two has ended.
That probably would be fine, except the central bank has put such an emphasis
on core inflation over the years.
Because of this, some see
core inflation as a more accurate measurement of price fluctuations.
For the first half - year, headline inflation has risen 0.7 per cent
while core inflation has increased by 1.4 per cent.
Since core inflation is running at roughly 2.3 % a year, I wanted stocks that could at least keep up with inflation, meaning an earnings yield of more than 2.3 %.
In the absence of a significant slowdown in growth or weakness in the less cyclical parts of the index,
core inflation looks set to accelerate further.
Using 1.0 % inflation, fair value would rise another 5 % but such a low inflation rate may be too low for comfort unless monthly
core inflation strengthens.
But while the headline numbers were strong, after stripping out the fading impact of past declines in energy costs,
core inflation over the same period remained subdued at just 0.9 %.
Low
core inflation reflects muted price pressures across a wide range of goods and services, consistent with material excess capacity in the economy.
Later this year, we will answer the question of whether we should continue to focus on one measure of underlying inflation and, if so,
whether core inflation will keep that role.
Since 1967, average differences in headline
vs. core inflation have essentially been zero, despite distinct periods of cyclical variation.
While growth is solid and inflation rising, we are not yet seeing the kind of upward pressure on wages that is needed to sustain gains in the underlying or
core inflation rate.
Yet the rise in oil prices we have seen so far is unlikely to pose a significant drag on the global economy and its impact
on core inflation should be minimal, we believe.
Our new measures
of core inflation are all below 2 per cent presently, weighed down by excess capacity in the economy.
Last but not the least are headline and
core inflation numbers, which both grew faster than the Inflation Report suggested.
In addition, consumer inflation is above the central bank's projected target of 2 percent,
while core inflation is hovering around the bank's 2 - percent target.
However, prices of services were only 1.0 percent higher, compared with a 1.5 percent increase in March
Core inflation measures of inflation, which the ECB also looks to as a guide, were also below expectations.
On the other hand, while our forecasts for
U.S. core inflation at 1.7 % are largely in line with consensus expectations, we see upside risks due to tax reform.
What you are seeing now
with core inflation measures that are below headline inflation, and where they have been drifting down, is just a reflection of the excess capacity we have had over the last year.
Upon the surface, the latest fall in the
US Core inflation rate, from 2.3 %, four months ago to 1.9 %, and the latest surge in US housing prices (as reflected by the Case - Shiller Index) present a somewhat puzzling divergence between the US inflation outlook and housing prices.
The Australian dollar surged above US80 cents after the Australian Bureau of Statistics released higher - than - expected
core inflation data, crushing market expectations of a rate cut at next week's Reserve Bank of Australia meeting.
The CPI less food and energy, also
called core inflation, increased 0.2 % (1.9 % annualized rate) on a seasonally adjusted basis, after 3 months of consecutive 0.1 % montlhy gains.
If core inflation were to return above 2 percent and continue trending moderately higher, it would be a game changer for rates,» said Graham.
«It's damaging to the Fed to talk
about core inflation when everyone can see headline inflation is rising,» Bullard said last month.
Euro zone inflation slowed to 1.2 percent year - on - year in April, down from 1.3 percent in March, and
core inflation fell even more, raising questions about the ECB's plan for withdrawing its monetary stimulus.
RBC
expects core inflation to remain below 2 %, and unemployment to average around 8 %, before lowering to 7.3 % in 2011.
Overall inflation thus declined from the +3.0 % range (YoY) early in the year to 1.4 % in July even
though core inflation remained in the 2.2 % range.
This is hurting Fed credibility to be talking about
core inflation when everyone sees headline inflation, Bullard said.
The Australian dollar offered little for investors throughout trade on Friday failing to recover the losses suffered on the back of shrinking private capital expenditure and an improved U.S.
core inflation read.
«With the housing bubble already showing signs of bursting and household debt at extremely high levels, higher borrowing costs will dampen economic growth and
pushing core inflation even further below target,» Madani added.
This page provides -
Canada Core Inflation Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.
But the price of food and energy — basic essentials, which, due to their volatility,
core inflation doesn't take into account — has begun what many see as a slow - but - steady march north.
Canada's annual rate of
core inflation dropped to 1.4 % late last year, and interest rates in this country are not expected to inch up before the second half of 2011.
And I think we have
core inflation moving closer to the Fed «s target with the unemployment hitting below 4 percent fairly soon.
The Inflation GPS, developed with BlackRock's Scientific Active Equity team, incorporates big data on price trends and a daily - updated «nowcast» of inflation - related statistics to give a read on
where core inflation is headed in major economies.