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IPFS News Link • Economy - International

Are Food and Energy Excluded from Inflation Measures?

• by Peter Jacobsen

This week for Ask an Economist, I have another question from Dr. Overfield. His question is:

"I would like to ask another economics question. While reading The Wall Street Journal I note that food prices in the United Kingdom have increased 19% the past year while inflation is recorded as 11%. I note that in articles discussing inflation, food and energy prices are always excluded from the calculation. Since those items are most important to keep us from starving in our cold, dark rooms, why are those items excluded from the calculation of inflation?"

Food and energy are actually considered in some inflation measures, including the measure that usually hits news headlines, but Dr. Overfield is correct that food and energy are often excluded in conversations about inflation. So why are they sometimes excluded? In order to answer this, it's helpful to talk about the different ways the government reports inflation.

Quantifying Inflation