Thursday, April 17, 2014

Why We Cannot Hide Behind Core Inflation Anymore

Often, when government officials or central bankers wish to downplay price inflation numbers that appear to the masses as too hot to handle comfortably, they stress so-called "core inflation" which removes food and energy from the CPI because of their more volatile nature. Many think this is mere slight-of-hand rhetoric meant to confuse more than clarify. Most politicians and their intellectual enablers assert, however, that "core inflation" gives a better picture of overall price trends.

Well, regardless of the motive, we cannot hide behind core inflation anymore. As reported by Business Insider:
"Core" inflation — a measure that ignores food and energy prices — unexpectedly accelerated to 1.7% from a year earlier, up from 1.6% in February. Gains were driven by an acceleration in housing prices, which account for a little more than 41% of the whole index. The year-over-year change in the housing component rose to 2.8% from 2.5%, marking the fastest advance in housing prices since 2008.

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