Food and energy are heavily dependent on commodity prices, which can swing widely: one month the Fed would be cutting by 3% and the very next month raising by 4% if they followed non-Core CPI (versus PCE).
The Bank of Canada, who sets rates in Canada based on StatCan data, looks are three different CPI measures:
Interesting, for sure. I guess we need some way to include these volatile elements in a sane manner, which allows for sustained increases (or decreases) to register while smoothing the wide swings.
There are multiple types of CPI because they measure different things, and they each have pluses and minuses.
The reason why Core CPI is useful is illustrated by the orange and blue lines in the first graph:
* https://www.economicshelp.org/blog/2587/inflation/difference...
Good luck trying to policy with the orange (non-Core, which has food and energy) line. Or the red line in Chart 1 of:
* https://www.frbsf.org/research-and-insights/publications/doc...
Food and energy are heavily dependent on commodity prices, which can swing widely: one month the Fed would be cutting by 3% and the very next month raising by 4% if they followed non-Core CPI (versus PCE).
The Bank of Canada, who sets rates in Canada based on StatCan data, looks are three different CPI measures:
* https://www.bankofcanada.ca/rates/indicators/capacity-and-in...
* https://www.statcan.gc.ca/en/statistical-programs/document/2...