Measuring U.S. Core Inflation During COVID-19

This research article examines the fluctuations in U.S. core inflation during the COVID-19 pandemic, focusing on the years 2020 and 2021. It compares various approaches to measuring core inflation, particularly in light of the erratic price changes caused by the pandemic. The study highlights that the Federal Reserve's traditional measure of core inflation, which excludes food and energy prices, was nearly as volatile as the headline inflation during this period. The article discusses alternative measures, such as the Atlanta Fed's sticky-price inflation rate, and emphasizes that outlier-exclusion measures, like the Cleveland Fed's median inflation rate and the Dallas Fed's trimmed mean inflation rate, performed better in filtering out transitory shocks. The findings suggest that these alternative measures provided a more stable assessment of core inflation, particularly as they were less affected by large price changes in various industries. The article also reviews the relationship between core inflation measures and economic slack, affirming that outlier-exclusion measures aligned more closely with economic conditions during the pandemic.