The consumer price index (CPI) is calculated by looking at the cost of a market basket of consumer goods and services purchased by an average urban consumer. During the past two years, overall CPI inflation has increased and decreased, in part because of supply and demand shocks to the prices of individual goods and services, such as eggs and shelter. These specific shocks make it difficult to identify trends in broad inflation. But alternative price indexes can help measure the “core” of inflation.

The FRED graph above shows the all-items CPI inflation rate (dashed red line), reported by the U.S. Bureau of Labor Statistics, plus two special aggregations of consumer prices:

• The “all items less food and energy” CPI inflation (green line) is also reported by the BLS; it excludes the prices of food and energy, two components of the all-items CPI that are frequently the most volatile.
• The “sticky price” CPI inflation (blue line) is reported by the Federal Reserve Bank of Atlanta, which sorts the components of the all-items CPI and categorizes them as either “flexible” or “sticky” (slow to change).

Between January 2013 and January 2023, both of these special aggregations of consumer prices have signaled very similar core inflation rates; but their lockstep movement broke down during the COVID-19-induced recession in 2020. Since then, “all items less food and energy” CPI inflation has been noticeably more volatile than “sticky price” CPI inflation. This dynamic suggests a broader range of price categories has experienced notable and unexpected changes.

Stick to the FRED Blog and learn more about core inflation. A post on the topic was recently referenced in the Federal Register, the daily journal of the United States government, as part of a proposed rule.

How this graph was created: Search FRED for “Sticky Price Consumer Price Index.” Next, click the “Edit Graph” button, select the “Add Line,” and search for “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average.” Next, select the “Line 2” tab and use the “Units” dropdown menu to select “Percent Change from Year Ago.” Repeat the “Add Line” step to add the “Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average” series to the graph and calculate their year-over-year percent growth rate.

Suggested by Diego Mendez-Carbajo.