John Lounsbury

Why Core Inflation?

The basic problem with the way inflation is "measured" and used by policy makers is that discretionary items are over emphasized and items for which there is less discretion (energy, food and health care) are under emphasized. This is convenient for simplifying policy decisions and possibly valid for viewing projections of the distant future (this second point may be debatable), but it does little to give a realistic view of current conditions and how demand in the near future will be affected.

The current CPI and PPI measurements are in fact a sham if the goal is to manage economic issues over a time frame of one to a few years.