In theory, core inflation represents an appealing concept in that it filters out the more volatile components and/or temporary factors, which should be disregarded for monetary policy purposes. In practice though, measures of underlying inflation may lack credibility with the public. Furthermore, there is no unique method to derive such measures and different measures often provide very different figures.
As these COVID-related disruptions subside, most forecasters expect inflation to move back down toward the Federal Reserve’s 2 percent long-run objective on its own. That is the sense in which currently high inflation is likely to be transitory. In that regard, the August monthly CPI reading was the first month with a notable retrenchment among COVID-sensitive categories like hotels, used cars, and rental cars.