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Inflation with the volatile food and energy categories stripped out. Because food and fuel prices swing sharply month to month, the Fed watches core inflation for the steadier underlying trend.
Why It Matters
Headline inflation can spike on a temporary oil shock and then fade; core inflation tells the Fed whether price pressure is broad and sticky. When headline runs hot (e.g., energy up 23% in 2026) but core is cooler, the Fed has to judge how much of the spike will pass through versus stick — which shapes whether rates stay high.
Key Points
- Excludes food and energy to reveal the underlying trend.
- A gap between headline and core inflation often points to a supply shock (like oil).
- The Fed weighs core heavily when setting policy.
Related Terms
Common Questions
Inflation with the volatile food and energy categories stripped out. Because food and fuel prices swing sharply month to month, the Fed watches core inflation for the steadier underlying trend. Headline inflation can spike on a temporary oil shock and then fade; core inflation tells the Fed whether price pressure is broad and sticky. When headline runs hot (e.
Headline inflation can spike on a temporary oil shock and then fade; core inflation tells the Fed whether price pressure is broad and sticky. When headline runs hot (e.g., energy up 23% in 2026) but core is cooler, the Fed has to judge how much of the spike will pass through versus stick — which shapes whether rates stay high.
Excludes food and energy to reveal the underlying trend.
A gap between headline and core inflation often points to a supply shock (like oil).
The Fed weighs core heavily when setting policy.