kjarnaverðbólgu

Core inflation, known as kjarnaverðbólga in Icelandic, is an economic metric that measures inflation excluding volatile elements. It is derived from the general price index, typically the Consumer Price Index (CPI), by removing certain components that are prone to rapid price fluctuations. These components most commonly include food and energy prices. The rationale behind excluding these items is that their prices can be significantly influenced by temporary supply shocks, weather events, or geopolitical factors, which do not necessarily reflect the underlying, more persistent inflationary pressures in the economy.

By focusing on the prices of goods and services that change more gradually, core inflation is believed to provide a clearer picture of the economy's true inflation trend. Central banks and policymakers often monitor core inflation closely as it is considered a more stable indicator of future inflation and is therefore a key consideration when setting monetary policy. For instance, if core inflation is rising steadily, it might signal a need for tighter monetary policy to prevent the economy from overheating. Conversely, low or falling core inflation might suggest the need for more stimulative policies. The specific basket of goods and services excluded can vary slightly between different countries or statistical agencies, but the principle of removing the most volatile components remains consistent.