Ex-Food and Energy

A measure of inflation in the United States that considers what people spend on staple goods and services other than food and energy. It is calculated by taking the average of price changes to a basket of goods and services compiled by the U.S. Department of Labor. The ex-food and energy index is identical to the Consumer Price Index except that it leaves out food and energy. Some consider the ex-food and energy index a more reliable measure of inflation, as food and energy prices are quite volatile. Critics, however, contend that leaving these prices out does not adequately measure short-term changes in the real value of money.

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5% y/y for the ex-food and energy component compared to 2.

U.S. February PPI rose 0.2% with the core rate up 0.2% as well

If one's objective is to construct a measure of inflation on which large relative price changes have a limited effect, then k-core inflation seems clearly preferable to both inflation ex-food and energy and trimmed mean inflation.

An alternative to ex-food and energy inflation that does remove only the largest price changes each period is trimmed mean inflation.

If the goal is to construct a measure of underlying inflation by removing large relative price changes, then a trimmed mean has an obvious advantage relative to ex-food and energy inflation: It removes categories with the largest price changes, regardless of whether they are food and energy categories.

Having motivated k-core inflation as an appealing alternative to ex-food and energy inflation and trimmed mean inflation, we now compare the behavior of k-core to inflation ex-food and energy (henceforth XFE), and in the next section, to trimmed mean inflation (henceforth TMI).

In contrast, inflation ex-food and energy excludes food and energy prices regardless of how much those prices change, and trimmed mean inflation excludes fixed percentiles of the price change distribution, regardless of the size of price changes to which those percentiles correspond.