Core Inflation

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Definition: Core Inflation

A measure of inflation excluding seasonal and volatile prices. To avoid false measure of inflation, core inflation doesn’t take care of products that exhibit temporary price shocks. It is an indicator of underlying long term inflation. It is calculated based on Consumer Price Index (CPI)

In India, there is no single measure of inflation which captures economy-wide inflationary pressures in the economy. Year on year percentage change in wholesale price index (WPI), which is used as an indicator of headline inflation. Although there are four consumer price indices (CPIs), they are targeted at different population groups and none of them captures economy-wide inflationary pressures. Due to these constraints, therefore, the Reserve Bank monitors an array of measures of inflation.

In India most central banks excludes petrol and food prices owing to oil price variations and seasonal variations. They also exclude the impact of government excise duties.

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