In the decomposition procedure, movements in core inflation affect headline inflation one-for-one; as a result, the contributions of food and energy price inflation are defined as each component’s price change relative to the core, weighted by its share in total nominal consumer spending. (Note that the “other” category includes the effects of changes in food prices.)
The estimated contribution of movements in import prices is also computed relative to core inflation; thus, if import prices are rising at the same rate as core inflation, they have no estimated effect on the shortfall of overall inflation from 2 percent. In addition, the decomposition takes account of lags in the adjustment of core inflation to movements in resource utilization and other factors.