Headline Inflation vs Core Inflation

Headline Inflation vs Core Inflation

Subject – Economy

Context – ‘Tax cut on fuels positive for inflation management’

Concept –

Headline Inflation

• Headline Inflation is the measure of total inflation within an economy. It includes price rise in food, fuel and all other commodities.
• The inflation rate expressed in Wholesale Price Index (WPI) usually denotes the headline inflation. Though Consumer Price Index (CPI) values are often higher, WPI values traditionally make headlines.

Core Inflation (Underline Inflation or Non-food Inflation)

• Core inflation is also a term used to denote the extend of inflation in an economy. But Core inflation does not consider the inflation in food and fuel. This is a concept derived from headline inflation.
• There is no index for direct measurement of core inflation and now it is measured by excluding food and fuel items from Wholesale Price Index (WPI) or Consumer Price Index (CPI).

Core inflation = Headline inflation – (Food and Fuel) inflation.