First, since a large share of U.S. oil is imported, a significant difference could exist between the value-added price deflator comprising nominal income and more-appropriate measures of true consumer price inflation. Monetary policy makers would be better off focusing directly on these more-appropriate measures.
Second, as before, if prices were highly sensitive to supply shocks but not sensitive to output movements, even nominal income targeting could imply substantial increases in unemployment. 3  Core consumer price inflation is defined to exclude direct energy and food prices and hence more accurately measures the continuing effect of an oil price shock.