DMPQ:What do you understand by the term Headline Inflation and core inflation?

Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices (e.g., oil and gas), which tend to be much more volatile and prone to inflationary spikes .On the other hand, “core inflation ” (also non-food-manufacturing or underlying inflation) is calculated from a price index minus the volatile food and energy components.Headline inflation may not present an accurate picture of an economy’s inflationary trend since sector-specific inflationary spikes are unlikely to persist.

Core inflation represents the long run trend in the price level. In measuring long run inflation , transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy.

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