A comparison of measures of core inflation.

Federal Reserve Bank of New York Economic Policy Review, December, 2007 by Rich, Robert

* Designed to remove transitory changes from aggregate price data, measures of underlying, or "core," inflation are important tools in the monetary policymaking process.

* Somewhat surprisingly, little consensus has been reached on a preferred measure of U.S. core inflation.

* An evaluation of several proposed measures of U.S. core inflation, including the popular ex food and energy series, finds that no measure consistently dominates the others.

* There is arguably too much variability in the nature and sources of transitory price movements to be captured effectively through the design of any individual measure.

* The general practice of focusing on a measure of core inflation that excludes food and energy does not seem to be...

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