Headline Inflation UPSC NOTE

 What is Headline inflation?

  • Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices (e.g., oil and gas), which tend to be much more volatile and prone to inflationary spikes.

  • On the other hand, "core inflation" (also non-food-manufacturing or underlying inflation) is calculated from a consumer price index minus the volatile food and energy components.

  • Headline inflation may not present an accurate picture of an economy's inflationary trend since sector-specific inflationary spikes are unlikely to persist.

  • The European Central Bank and the Bank of England have mandates that spell out their inflation goals in terms of headline inflation.

  • India also focuses on headline inflation.

  • In the United States, however, the Federal Open Market Committee (FOMC) focuses on core inflation—namely the "personal consumption expenditures price index".

How inflation erode the purchasing power?

  • This is inflation's primary and most pervasive effect. 

  • Purchasing power is the value of a currency expressed in terms of the number of goods or services that one unit of money can buy. 

  • Purchasing power can weaken over time due to inflation. 

  • That's because rising prices effectively decrease the number of goods or services you can buy.

  • An overall rise in prices over time reduces the purchasing power of consumers since a fixed amount of money will afford progressively less consumption.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Headline Inflation UPSC NOTE
Headline Inflation UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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