What inflation index excludes food and energy prices?
Answer (2)
The inflation index that excludes food and energy prices is called Core CPI or Core Consumer Price Index. This is used by policymakers to better understand the underlying trend in inflation. The reason why food and energy are excluded is that their prices often change very quickly due to events like typhoons, oil shortages, or global supply chain disruptions. These sudden changes can make the overall inflation number look more extreme than it really is.For example, if a typhoon damages crops in the Philippines, vegetable and rice prices may increase sharply for a few weeks. If we look only at Headline CPI, it may seem like inflation is very high. But if we look at Core CPI, which ignores these temporary changes, we get a better idea of how stable or unstable the prices of other essential goods are over time.Core CPI helps the Bangko Sentral ng Pilipinas (BSP) make better decisions. If only food and oil prices are going up due to temporary reasons, the BSP might decide not to raise interest rates. But if Core CPI is also rising, it shows that inflation is becoming more permanent, and the government might act to slow down spending.For students, understanding the difference between Headline and Core CPI shows how smart policies are made—not just by looking at sudden price changes, but by focusing on long-term economic trends.
The inflation index that excludes food and energy prices is called Core Inflation. It removes these volatile categories because food and energy prices tend to fluctuate widely and can distort the overall inflation trend. By excluding them, core inflation provides a clearer picture of the underlying, long-term inflation trend in the economy.
