Inflation at its core

Is it misleading to remove the cost of food and energy from the CPI measure of inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI).? Do rising food and energy prices – commodities – alone portend a coming age of hyperinflation?

What the hawks are talking about

With gas prices soaring to record highs in California, the inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI). hawks are in a tizzy. How can it be, they ask, that inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI). is “stable” yet the true cost of living is higher than ever?

For hawks, the only conclusion that seems plausible is conspiracy — the Federal ReserveThe central bank in control of regulating the U.S. financial and monetary system. (the Fed) is cooking the books, relying on the artificial and misleading figure presented by the Bureau of Labor Statistics (BLS) in the Consumer Price IndexThe Consumer Price Index measures and tracks the rate of consumer inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI).. This is presented as an index of fluctuations in the general price of a wide selection of consumable items, goods and services. (CPI).

Yes, in deciding monetary policyThe Federal ReserveThe central bank in control of regulating the U.S. financial and monetary system.'s use of short-term interest rates and other infusions and withdrawals of dollars in circulation to control pricing and employment in the economy. the Fed does indeed rely on CPI. However, it must rely on CPI. Without it, an accurate picture of price stability in the economy cannot be had.

The Fed gauges much of its monetary policyThe Federal ReserveThe central bank in control of regulating the U.S. financial and monetary system.'s use of short-term interest rates and other infusions and withdrawals of dollars in circulation to control pricing and employment in the economy. by tracking core inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI)., as reported by the CPI. Core inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI). is a measure of annual price growth based upon a basket of consumer goods and services, excluding the volatilities of food and energy — commodities.