Question

What is the core rate of inflation (not the number, but as a concept)? Why would we look at that? What is the PPI? How does it compare to the CPI (again, as a concept, not as a number)?

Answer 1

The core inflation shows the long term trends of prices in the economy, but it does not include the prices of food and energy products. This is because the price of the food and energy products are too volatile to be included in the index. Their prices are subject to frequent changes. The inflation has cruicial impact on your standard of living, if the rise in the inflation is not compensated by a rise in income then you are probably loosing your purchasing power that menas you are poorer than before.

The producer price index is the weighted averge index of the selling prices of goods and services in the economy over a period of time. And the consumer price index is the weighted averge of the prices of consumer goods and services purchased by the households in the country.