If the CPI overstate inflation, how do we know we are not overcorrecting for this and end up understating inflation?
What is the number telling us about the real world when we remove the volatile part of inflation? Does that mean nobody uses energy during that time!?
That is a very good question. I believe that CPI is volatile because it takes into account food and energy prices. I believe that core inflation is the appropriate measure in determing the real inflation rate.
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