Krugman re-explains core inflation to knuckleheads
http://krugman.blogs.nytimes.com/2013/04/30/still-coring-after-all-these-years/
The idea of core inflation is to strip out the volatile prices to get a better measure of underlying trends. Core inflation is NOT used for things like cost of living adjustments, and its not the headline number in the news; so anyone who claims, with a knowing sneer, that the inflation number you hear is ignoring food and energy is just ignorant. Core is, however, what the Fed uses to assess monetary policy, because it believes that the headline number is too volatile, and it doesnt want to overreact either to short-run inflation or short-run deflation.
Now, this could be all wrong. A surge in commodity prices could be the harbinger of sustained higher inflation; and thats what a lot of people were claiming in early 2011, back when Paul Ryan was accusing Ben Bernanke of debasing the dollar, even as BB was basically saying dont worry, look at the core.
So:
OK, what about the claim that the feds are faking the numbers? I could explain to you what theyre doing, and whats wrong with the various critiques. But theres an even easier route: we have independent measures. The Billion Prices Project uses prices off the web to construct its own index; it looks remarkably similar to the official CPI:
No, the core isnt rotten and inflation really is low.