In simple terms
Core inflation is the headline inflation rate with the jumpiest prices taken out. In most countries that means food and energy.
Those prices swing on weather, harvests and oil markets. Removing them leaves a steadier signal about where inflation is actually heading.
How it works
Statisticians use two broad methods, and they do not always agree.
The exclusion method drops the same categories every month. The European Central Bank’s main measure is the Harmonised Index of Consumer Prices excluding energy and food. It treats those two as volatile components subject to frequent temporary shocks.
The trimming method instead drops whatever happened to move most that month. The Bank of Canada’s CPI-trim removes the components sitting in the tails of the monthly distribution of price changes, the top and bottom 20 percent by weight. Its CPI-median takes the single price change at the middle of that distribution.
So two countries both reporting core inflation are often not measuring the same thing. Canada uses trimming partly because tax changes, such as a shift in sales tax, can swing the total index on their own.
Why it matters
Central banks target headline inflation, but they read core when setting rates, because it is a better guide to where headline will settle.
That gap explains a familiar frustration. A household can face a sharp jump in fuel and grocery bills while officials point to cooling core inflation. Both statements can be true at the same time.
Core measures also have limits. The ECB has warned that recent economic dislocations left a sizeable and slow-reverting temporary element inside underlying inflation measures, making them less informative about the medium term than usual.
Where you’ll see it
- Monthly inflation releases, reported next to the headline rate.
- Central bank statements explaining a rate decision.
- Market commentary in the days before a rate meeting.
Example
If prices across the whole basket rose 3.4 percent over a year but 2.4 percent excluding food and energy, headline inflation is 3.4 percent and core inflation is 2.4 percent.
Often confused with
Headline inflation. Headline inflation covers the entire basket, food and energy included. Core leaves the volatile parts out.
Key facts
- The ECB defines core inflation as the Harmonised Index of Consumer Prices excluding energy and food.1
- Energy and food are excluded because they are volatile components subject to frequent transitory shocks.1
- The ECB has warned that recent major economic dislocations embedded a sizeable, possibly slow-reverting transitory element in underlying inflation measures, making them less informative for the medium term.1
- The Bank of Canada uses core measures because some CPI components are particularly volatile and because changes in indirect taxes can cause sizeable swings in total CPI.2
- CPI-trim excludes the components whose monthly rates of change fall in the tails of the distribution, removing the bottom and top 20 percent of weighted monthly price changes.2
- CPI-median is the price change at the 50th percentile of the distribution of monthly price changes, measured by CPI basket weights.2
Related concepts
In the news
Quick checkName the two broad methods used to build a core inflation measure.Show answer
Exclusion, which drops fixed categories such as food and energy, and trimming, which drops whichever prices moved most that month.
Sources
- European Central Bank. Underlying inflation measures: an analytical guide for the euro area (Economic Bulletin, Issue 5/2023). 2023 (accessed 14 September 2026)
- Bank of Canada. Key inflation indicators and the target range. Undated (accessed 14 September 2026)
Editorially reviewed by Specialty Digest Editorial TeamLast reviewed September 17, 2026Researched and drafted with AI assistanceReport an issue