This paper provides a review of the concept of core inflation and evaluates the performance of several proposed measures. We first consider the rationale of a central bank in setting its inflation goal in terms of a selected rate of consumer price growth and the use of a core inflation measure...

Critics of the consumer price index - the most widely watched inflation measure - contend that it overstates inflation by as much as 1 percentage point a year. Some have argued that alternative indexes eliminate the CPI's upward bias and offer a more accurate reading of inflation levels. A...