Policymakers tend to focus on core inflation measures because they are thought to be better predictors of total … inflation over time horizons of import to policymakers. The authors find little support for this assumption. While some measures … of core inflation are less volatile than total inflation, core inflation is not necessarily the best predictor of total …

The author proposes an alternative measure of inflation that captures the intuition behind the use of quot …;corequot; measures. Inflation is modeled as an unobserved factor affecting the components of an aggregate price index (including food and … energy). The common component, estimated using Kalman filtering, resembles usual measures of core inflation; its …

Two rationales offered for policymakers' focus on core measures of inflation as a guide to underlying inflation are … that core inflation omits food and energy prices, which are thought to be more volatile than other components, and that … core inflation is thought to be a better predictor of total inflation over time horizons of import to policymakers. The …