Core, What is it Good For? Why the Bank of Canada Should Focus on Headline Inflation

Philippe Bergevin and Colin Busby
Additional contact information
Philippe Bergevin: C.D. Howe Institute
Colin Busby: C.D. Howe Institute

No 124, e-briefs from C.D. Howe Institute

Abstract: With inflation as measured by the Consumer Price Index (CPI) growing faster than the Bank of Canada’s 2 percent target, the Bank has pointed out that core CPI, which excludes items whose prices are especially volatile, is at or below target and, further, that the Bank anticipates total CPI eventually will converge with the core measure. While the Bank is certainly justified in using core CPI as one of many imperfect measures of underlying inflation, our results suggest that the Bank should, at a minimum, revisit the role of core within its inflation-targeting framework and consider de-emphasizing core CPI in its communications or as an operational guide.

Keywords: Monetary Policy; Bank of Canada; inflation; Consumer Price Index (CPI); core CPI (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2011-09
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published on the C.D. Howe Institute website, September 2011

Downloads: (external link)
https://www.cdhowe.org/public-policy-research/core ... s-headline-inflation (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdh:ebrief:124

Access Statistics for this paper

More papers in e-briefs from C.D. Howe Institute Contact information at EDIRC.
Bibliographic data for series maintained by Kristine Gray ( this e-mail address is bad, please contact ).