Grunnverðbólga

Grunnverðbólga, also known as core inflation, is a measure of inflation that excludes certain volatile components of the consumer price index. The most common items excluded are energy prices and food prices. The rationale behind excluding these items is that they are subject to rapid and unpredictable price swings due to factors such as weather events, geopolitical instability, or changes in global supply and demand.

By removing these volatile elements, grunnverðbólga aims to provide a clearer picture of the underlying inflationary pressures in the economy. Economists and policymakers often use grunnverðbólga to assess the persistent trend in price increases and to inform monetary policy decisions. For instance, if energy prices surge temporarily, it might lead to a spike in headline inflation, but if grunnverðbólga remains stable, central banks might be less inclined to raise interest rates aggressively.

The specific components excluded from the calculation of grunnverðbólga can vary slightly between different countries or statistical agencies. However, the principle remains the same: to distill the more stable, long-term price trends from the short-term fluctuations. This makes it a valuable tool for understanding the true rate of price appreciation that affects the general cost of living over time, beyond temporary shocks.