The core inflation rate:

The core inflation rate is defined as a measure of inflation that excludes certain items that can be very volatile, specifically food and energy prices. This exclusion is intentional because food and energy costs often experience significant short-term fluctuations due to factors like seasonal changes, geopolitical tensions, or supply-chain disruptions. By removing these items, economists and policymakers can gain a clearer understanding of the underlying trends in inflation, focusing on more stable prices that reflect overall economic conditions.

This distinction is important because it helps guide monetary policy and economic decision-making. Core inflation is seen as a more reliable indicator of long-term inflation trends, while overall inflation, which includes all goods and services, may be misleading if it is significantly affected by the volatile nature of food and energy prices. Therefore, the correct understanding of core inflation emphasizes its definition of excluding these categories to highlight more persistent inflationary pressures in the economy.