Inflation data

Most central banks closely monitor the core inflation as one of the key figures in determining monetary policy. However, with large increases in base and agricultural commodities over the past decade, we think stripping out food and energy prices from the inflationary figures makes “core” inflation no longer useful.

It's not difficult to figure out that our daily cost of living has risen sharply over the past few years. While larger items such as cars, TV and some luxury imported goods have stayed flat due to our strong currency, the typical family does not often get the benefits of these luxuries. Instead, they are slapped with almost a daily “tax” every time they go out to buy groceries, fill up their car and take public transport. It is these issues that make us brush past some inflationary data as being unrealistic.

Further, governments are able to manipulate the goods and services making up these inflation figures by replacing goods that have increased more in price compared to those that have had a more neutral price effect. This enables them to somewhat control the inflation numbers so that it appears lower than the actutal figure.