Inflation has been a central economic theme in recent years, affecting everything from consumer spending to government policy decisions. Understanding inflation trends can provide valuable insights into the current state of the economy and help guide both individual financial planning and policy decisions. In this blog, we’ll examine recent trends in the Consumer Price Index (CPI) and Core CPI from late 2023 through 2024, exploring what they reveal about the ongoing changes in inflation.
CPI vs. Core CPI: What’s the Difference?
Before diving into the data, let's clarify the distinction between CPI and Core CPI.
CPI measures the overall change in the price of goods and services over time. It includes all categories, including food and energy, which are known for their price volatility. This makes CPI a comprehensive but sometimes unstable measure of inflation.
Core CPI excludes food and energy prices, focusing on categories like housing, healthcare, and transportation. By leaving out these volatile components, Core CPI provides a steadier view of underlying inflation trends. It’s often favored by policymakers as it gives a clearer picture of long-term inflationary pressures.
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Recent Trends in CPI and Core CPI (November 2023 - October 2024)
Recent data shows interesting dynamics between CPI and Core CPI, highlighting both the successes and challenges in the fight against inflation.
A Cooling Trend in CPI:
- The CPI’s year-over-year percentage change has gradually declined from 3.1% in November 2023 to around 2.6% in October 2024. This downward trend suggests that overall inflation is easing, thanks to a combination of stabilizing energy prices and economic cooling measures by the Federal Reserve.
- However, CPI has shown some fluctuation along the way, reflecting the influence of external factors such as changes in global oil prices or seasonal demand shifts. For instance, CPI saw minor increases in early 2024 before resuming its descent, indicating that the broader inflation battle isn’t entirely over.
Core CPI Remains Elevated but Stable:
- Core CPI, while also trending downward, has remained consistently higher than CPI, moving from 4.0% in November 2023 to around 3.3% in October 2024. This stability highlights that although overall inflation is decreasing, the prices of essential services and housing continue to experience steady growth.
- The steadier decline in Core CPI indicates persistent inflation in sectors less affected by immediate market changes, such as housing and healthcare. This is often more challenging to address through monetary policy alone and suggests that core inflation pressures are still present in the economy.
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