Ready for another economic buzzword in February 2023? Supercore inflation is a term used a term used to describe a measure of inflation that strips out the most volatile components of the Consumer Price Index (CPI).
Supercore inflation is a measure of inflation that removes short-term volatility in consumer prices to isolate and identify what is causing inflation to remain high.
This means that supercore inflation is calculated using non-volatile inflation measures, some of which include:
Trimmed Mean Inflation. This measure calculates inflation by removing a certain percentage of the most extreme price changes on both the upside and downside. For example, the trimmed mean inflation rate might exclude the top and bottom 10% of price changes to arrive at a core inflation rate.
Median Inflation. This measure takes the midpoint of the distribution of price changes, excluding any outliers on either end of the distribution.
Weighted Median Inflation. This measure is similar to median inflation, but it gives more weight to price changes that are more representative of the overall price index.
Sticky Price CPI. This measure calculates inflation using prices that are slow to change, such as prices that are reset on a quarterly or annual basis.
Sectoral Price Indices. This measure looks at inflation in specific sectors of the economy, such as housing or healthcare, to get a sense of underlying inflationary pressures.
The idea of supercore inflation was first introduced by Federal Reserve economist, Jim Stock, in the late 1990s. The supercore inflation measure is not an official inflation measure used by the U.S. government or the Federal Reserve, but is discussed and analyzed by economists and analysts as a way of getting a more accurate and reliable read on underlying inflation trends.
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