This article investigates empirically short-term dynamics between headline and core measures of consumer price index and personal consumption expenditure inflation over three sample periods: 1959:1-1979:1, 1979:2-2001:2, and 1985:1-2007:2. Headline and core inflation measures are co-integrated,...

Shocks to the macroeconomy can affect the public's expectations about inflation. But if the Federal Reserve monitors those expectations carefully and vigilantly pursues price stability, it can establish credibility and keep inflation in check.

This article investigates empirically short-term dynamics between headline and core measures of consumer price index and personal consumption expenditure inflation over three sample periods: 1959:1–1979:1, 1979:2–2001:2, and 1985:1–2007:2. Headline and core inflation measures are...