Core CPI (Excluding Food & Energy) vs Consumer Price Index (CPI) — Year-over-Year

What Core CPI (Excluding Food & Energy) measures

Core CPI measures consumer price changes excluding food and energy, which are volatile and often driven by supply factors rather than monetary policy. It is the Fed's preferred gauge of underlying inflation trends.

Core CPI at 3.1% shows that underlying inflation remains sticky above the Fed's 2% target. Housing costs and services inflation are the primary culprits. For executives, sticky core inflation means the Fed is unlikely to cut interest rates soon, keeping borrowing costs elevated. Budget planners should assume inflation-adjusted cost increases of 3%+ for services, labor, and real estate.

What Consumer Price Index (CPI) — Year-over-Year measures

The Consumer Price Index measures the average change over time in the prices paid by urban consumers for a basket of goods and services. The year-over-year change is the most commonly cited measure of inflation.

Inflation at 2.8% remains above the Federal Reserve's 2% target but has moderated significantly from the 2022 peak of 9.1%. For executives, this means input costs are still rising faster than the Fed's comfort zone, but the pricing environment is stabilizing. Companies with strong pricing power can pass through cost increases; those in competitive markets face margin pressure. The Fed is unlikely to cut rates aggressively until CPI moves closer to 2%.

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