A talk given at Ivey Business School by Deputy Governor of the Bank of Canada, Rhys R. Mendes.
A writeup is at: Underlying inflation: Separating the signal from the noise - Bank of Canada
Def: Underlying Inflation: the lasting portion of inflation, that is, the portions that aren’t caused by short-term influences.
Def: Core Inflation: One of many measures of underlying inflation.
- Ex. Exclude food & energy as price changes as they end to be short lived. That used to be the case, not anymore as this is obviously crude.
It can take up to 2 years for policy to fully affect inflation. That’s why measuring underlying inflation and not reacting to short-term or real inflation is important.