Why does the central bank pay attention to "core inflation"?
A. It includes all government taxes.
B. It focuses on food and oil only.
C. It removes temporary price changes to focus on long-term trends.
D. It helps small businesses directly.
Answer (1)
The answer is C. Core inflation excludes items like food and energy, which can have price changes due to temporary shocks like typhoons or oil supply issues. By looking at core inflation, the Bangko Sentral ng Pilipinas (BSP) can make better long-term decisions, avoiding overreactions. For instance, if vegetable prices rise because of a storm, that may not mean the whole economy is overheating. Core inflation helps the BSP stay focused on overall price stability.
