What are headline and core inflation?

1. Headline inflation refers to the change in value of all goods in the basket.

2. Core inflation excludes food and fuel items from headline inflation.

3. Since the prices of fuel and food items tend to fluctuate and create ‘noise’ in inflation computation, core inflation is less volatile than headline inflation.

4. In a developed economy, food & fuel account for 10-15% of the household consumption basket and in developing economies it forms 30-40% of the basket.

5. Headline inflation is more relevant for developing economies than developed economies.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)


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