Core CPI measures the change in prices of all items in the Consumer Price Index excluding food and energy components. By stripping out these volatile categories, Core CPI provides a cleaner signal of the underlying inflation trend.

Why Exclude Food & Energy?

Food and energy prices are heavily influenced by supply shocks (weather, geopolitics, OPEC decisions) that may not reflect broad-based inflationary pressures. A hurricane that temporarily spikes gasoline prices, for example, doesn't necessarily mean the economy is overheating. Core CPI filters out this noise.

Fed's Preferred View

While the Federal Reserve officially targets inflation using the PCE Price Index, Core CPI receives enormous market attention because:

Goods vs. Services & "Supercore"

Core CPI splits into core goods (cars, apparel, furniture) and core services (rent, medical care, insurance). After the pandemic, core-goods inflation faded first as supply chains healed, while core services stayed hot. The Fed therefore zeroes in on "supercore"—core services excluding shelter—as the best gauge of demand-driven, wage-sensitive inflation.

Recent Trends

Core CPI tends to be "stickier" than headline CPI, changing more slowly because shelter and services adjust gradually. U.S. Core CPI peaked near 6.6% year-over-year in September 2022—its highest since 1982—and then disinflated more slowly than headline CPI, with shelter the last major component to cool.

Market Impact

Traders often react more to Core CPI than to the headline, since it better reflects the trend the Fed will respond to. A surprise of just 0.1 percentage point on the monthly core figure can swing rate-cut expectations, Treasury yields, and equities within minutes of the 8:30 a.m. ET release.