Core Versus Headline Inflation Again

In a recent Economic Synopses essay, the author questioned the Federal Open Market Committee's (FOMC's) emphasis on core inflation measures that strip away food and energy prices and provided some statistical analysis on the relative ability of core and headline inflation measures for predicting future headline inflation over the "Medium term." (The author defined the medium term as a horizon of two to three years.) The author also concluded that, for the period since the mid- 1980s, "There is no compelling evidence that core inflation is a better predictor of future headline inflation over the medium term."

Provided by: Federal Reserve Bank of St. Louis Topic: CXO Date Added: Jun 2011 Format: PDF

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