Reference no: EM131681841

Among central banks that practice inflation targeting, there is a debate over whether to target "headline" inflation or "core" inflation. Headline inflation means the consumer price index for all items. Some central banks favor headline inflation as a target because promising to stabilize a widely publicized inflation measure has maximum psychological impact on public expectations. Core inflation means consumer price inflation with adjustments to remove the most variable prices, like those of food and energy. Some central banks favor core inflation because food and energy prices are set in world markets and are beyond the control of domestic monetary policy. Compare the rates of core inflation and headline inflation for the most recent month and for the past year.