Core inflation rates – measures that exclude or downplay the more volatile components of inflation – are calculated to give policymakers and the public a better idea of the underlying inflationary pressures in an economy. Alternative measures use approaches that filter out short-term price disturbances to highlight the more persistent determinants of inflation.

This chapter finds that each of the five major OECD economies (the United States, the euro area, Japan, the United Kingdom and Canada) has several such measures that can provide useful information about underlying inflation developments. Based on recent changes in the best-performing of these measures, inflation pressures seem to be increasing in the United States, while no such pressures can be identified in the United Kingdom or Canada. In the euro area, core measures have been edging down, while in Japan, mild deflation looks likely to continue for some time. While useful, these measures are best judged in the wider context of all the available information on the overall state of the economy.