"I remember several years back then the oil price went through the roof - again, the governments answer to this problem - which would have sent the inflation figures into the stratosphere -- was to just take the cost of energy out of the numbers - and, hey presto - look mum, no big deal".
To my understanding core inflation does not include variations in the price of oil but headline inflation does.
I presume that it is not government's fault if people do fail to note the distinction.
Headline inflation
From Wikipedia, the free encyclopedia
Headline inflation is a measure of the total
inflation within an economy, including
commodities such as
food and
energy prices (e.g.,
oil and
gas), which tend to be much more
volatile and prone to
inflationary spikes. On the other hand, "
core inflation" (also non-food-manufacturing or underlying inflation) is calculated from a
price index minus the volatile food and energy components.
[1] Headline inflation may not present an accurate picture of an economy's inflationary trend since sector-specific inflationary spikes are unlikely to persist.
Uses
The
European Central Bank and the
Bank of England have mandates that spell out their inflation goals in terms of headline inflation.
India also focuses on headline inflation.
[2]
In the
United States, however, the
Federal Open Market Committee (FOMC) focuses on core inflation—namely the "
personal consumption expenditures price index". However, President of the
Federal Reserve Bank of St. Louis James B. Bullard explained that the FOMC still takes headline
PCE into account, and that since 2008 (in the wake of the
financial crisis) the FOMC has included forecasts for both types of inflation in its semiannual "Monetary Policy Report" for the
United States Congress. He emphasized that "
the Fed's main concern is long-run headline inflation and the prices people actually pay."
[1]
