Why doesn the government consider food & energy, and just core inflation?
The “Core” inflation rate is frequently quoted in the popular press and this gives the general public the impression that the “government” doesn’t care about (or track) the rise in the prices of food and energy. Actually this isn’t true. The “core” inflation rate is simply a component of the overall inflation rate. It is used by economists because often seasonal factors will skew the inflation rate. For instance a drought might cause fruit crops to fail, causing fruit prices to rise. But this rise actually has nothing to do with inflation (i.e. price inflation caused by an increase in the money supply). It is simply a result of the forces of nature. Another example of forces of nature causing price increases is when a hurricane causes refineries or drilling rigs to shut down. This might cause a temporary decrease in oil supply and if supplies are tight it could result in a temporary increase in oil prices. Economists want to eliminate this volatility from their calculations and so they
