Core inflation is a measure of inflation that excludes certain items that have volatile price movements.Inflation occurs when the prices of goods and services rise over time. Typically, the core inflation rate removes food and energy prices from consideration because their prices can fluctuate widely on any given day. For example, consider the effects of a drought or a flood on the price of crops. If prices are far higher or lower than they normally are, it could be due to temporary factors that correct themselves fairly quickly. But in the short term, inflation measurements can be skewed by price aberrations, creating a divergence from inflation’s overall trend, and creating misleading results. One way the Federal Reserve manages inflation is by manipulating interest rates. If core inflation exceeds the target rate, the Fed may raise interest rates to slow it down. But raising interest rates can affect other aspects of the economy and markets. Using an accurate gauge to measure inflation is important.