When the U.S. Bureau of Labor Statistics produces the consumer price index, Uncle Sam's official inflation gauge, it measures overall price changes for a basket of goods and services. The monthly stat is often referred to as "headline" inflation. The headlines lately are pretty shocking to anyone who buys groceries or gas: Food and energy prices are soaring. Food prices could rise 4% this year, and oil prices are likely to keep climbing.
So why would some economists -- including those at the Federal Reserve -- zero in on "core" inflation, an alternative CPI calculation that excludes all or most food and energy prices? Food and energy prices are volatile, more subject to extreme, short-term swings than other things we buy. Core inflation, the argument goes, provides a more accurate, long-term picture of price movement.
But the dramatic rise of food and fuel costs can make core-inflation figures seem wildly off base. Policymakers have long debated whether more weight should be given to commodities. Now, the rise of emerging economies strengthens the case for paying more attention to food and energy prices, says Ken Mayland, president of ClearView Economics. Events such as uprisings in the Middle East will still create short-term volatility. But as developing nations, such as Brazil, China and India, grow and their citizens can afford a higher quality of life, households consume more meat, grain and oil, increasing demand. That's creating an upward trend in food and energy prices that didn't exist in past decades, says Mayland -- a trend that's likely to persist in coming years, and one that may soon command everyone's full attention.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
Amid Mounting Uncertainty: Five Forecasts About AIThe Kiplinger Letter With the risk of overspending on AI data centers hotly debated, here are some forecasts about AI that we can make with some confidence.
-
Worried About an AI Bubble? Here’s What You Need to KnowThe Kiplinger Letter Though AI is a transformative technology, it’s worth paying attention to the rising economic and financial risks. Here’s some guidance to navigate AI’s future.
-
Will AI Videos Disrupt Social Media?The Kiplinger Letter With the introduction of OpenAI’s new AI social media app, Sora, the internet is about to be flooded with startling AI-generated videos.
-
What Services Are Open During the Government Shutdown?The Kiplinger Letter As the shutdown drags on, many basic federal services will increasingly be affected.
-
The Economy on a Knife's EdgeThe Letter GDP is growing, but employers have all but stopped hiring as they watch how the trade war plays out.
-
Apple Readies for AI Upgrade with New iPhonesThe Kiplinger Letter The tech giant has stumbled when it comes to artificial intelligence, but a new batch of iPhones will help it make headway.
-
Japan Enters a New Era of Risk and ReformThe Kiplinger Letter Japan has entered a pivotal moment in its economic history, undertaking ambitious policy and structural reforms to escape from decades of stagnation.
-
How Consumers Are Tinkering with Cutting-Edge AIThe Kiplinger Letter Companies launching artificial intelligence tools are jostling for consumer attention. Some products are already building a deep connection with users.
