Thus, our new measure of core inflation excludes only the volatile components of food and energy, as well as the three other most volatile components of the CPI: tobacco prices, intercity transportation prices, and mortgage interest costs. As before, the effect of changes in indirect taxes on the remaining elements is also excluded.
Not only does the new measure of core inflation have a stronger statistical basis for its creation, it is historically a better predictor of future total CPI inflation 11 than the old measure. Overall, we expect that these refinements will help to further increase the predictability of inflation in Canada in the years to come.