Core Inflation in Peru

This study examines core inflation in Peru, a fundamental concept for understanding price dynamics in economies where the central bank seeks price stability. Through an analysis of various statistical and econometric methods, different measures of core inflation are estimated for the period from January 1995 to December 1999. The study compares approaches such as the exclusion of volatile items, trend estimators, and median-based methods, among others. The main results indicate that the method that excludes the components with the highest variability in their contribution to inflation is the most appropriate, as it reduces variability and does not underestimate total inflation. This indicator thus serves as a valuable benchmark for monetary policy formulation, as it aligns closely with the inflation targets set by the Central Bank. The implications suggest that the implementation of a reliable core inflation indicator can improve the effectiveness of economic policy decisions and communication with the public. (Abstract and audio: Department of Economic Publications)