Core inflation: what it means
Inflation measured without the most volatile items, usually energy, food, alcohol and tobacco, to show underlying price pressure.
Core inflation removes the components of a price index whose prices swing most from month to month. In the UK the ONS core CPI measure excludes energy, food, alcoholic beverages and tobacco. The aim is to show the underlying trend that is less affected by global energy or food shocks.
Worked example
In a hypothetical month, headline CPI is 4% because energy prices jumped, while core CPI is 2.5%. That tells you much of the headline rate came from energy. If energy prices then fall back, headline inflation may drop quickly while core inflation moves more slowly.
How it trips up claims
- Core inflation is not what households pay overall; they still buy food and energy. The headline CPI rate covers the full basket.
- The Bank of England's target applies to headline CPI, though its Monetary Policy Committee also looks at core and services inflation.
- Definitions of "core" vary between countries, so international comparisons need care.
The ONS publishes core CPI as series DKO8 (CPI excluding energy, food, alcohol and tobacco).
Also searched as: underlying inflation, core CPI, inflation excluding food and energy
Key figures where it matters
Questions that use this term
Related terms
- CPI (Consumer Prices Index): The UK's main measure of consumer price inflation for the Bank of England's 2% target. It tracks the prices of a basket of goods and services bought by households.
- Headline figure: The main summary number that a statistical release leads with, such as annual CPI inflation or quarterly GDP growth. Other measures in the same release can tell a different story.
- CPIH: The Consumer Prices Index including owner occupiers' housing costs. The ONS's lead measure of consumer price inflation, it adds housing costs and council tax to CPI.
More inflation, prices and the economy terms: CPI (Consumer Prices Index) · CPIH · RPI (Retail Prices Index) · Nominal GDP · Chained volume measure · Purchasing power parity (PPP) · Bank Rate · Quantitative easing (QE) · Quantitative tightening (QT) · GDP deflator · Output gap · Productivity.