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What is the rate of inflation? It’s a simple question, but can be surprisingly ambiguous.For investors wondering when the Federal Reserve will start cutting rates, understanding the inflation reading that the Fed pays the most attention to to get to its stated 2% goal could be the key to predicting its next policy move.To understand what the 2% inflation target means, it’s worth understanding the different ways inflation can be measured.Don’t Miss:Core inflation is the change in the costs of goods and services, excluding traditionally more volatile categories such as food and energy. Core inflation rose 3.9% year over year in the January consumer price index report, the same pace as the prior month, but still well above 2%. It was also above the 3.7% economists forecasted, which sent the S&P 500 down 1.37% on the day of the report.Food and energy are excluded from this calculation because their prices are too volatile, and the Fed has much less direct control over them with their monetary policy tools than it does other categories. Also, raising interest rates has less of an impact on these staples because regardless of prices for food or energy, consumers still need to eat and fill up their cars.Consumers still feel the impacts of rising food and energy prices and so they are included in another measure: headline inflati …
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