While there are plenty of ways to measure inflation, of which, it could be said that none of them are completely satisfactory; it could also be said that measuring inflation without “volatile” energy and food prices contained within that stated inflation rate, does a grand disservice to everyone. The bottom line, is that a far better way to look at inflation is to smooth it out, through the means of looking at, for example, the 200 day moving average of inflation, without, therefore having to remove “volatile” aspects from the basket of components that are requisite in the makeup of the basic criteria for calculating that inflation.
In order to fairly reflect the current inflation rate, along with the salient factors applicable to that inflation rate, we thus must select the right items along with the right weighing of those items that make up that basket of objects in order to best measure inflation, which perhaps is more of an art than a science; and then, further, the prices so being utilized for those items in the basket, need to be accurate to the particular time period so being measured, and finally so as to smooth out the volatility of certain items on a given day, the best way to do that, is to thereby utilize a 200 day moving average as representing the marker for the official inflation rate for the country.
No doubt, by utilizing a 200 day moving average for the inflation rate, it would still be rather obvious as to whether or not prices were remaining stable, decreasing, or increasing; and more importantly, since it is an average, it would basically smooth out the day-to-day volatility that some components of the inflation rate, are more susceptible to. For a given government, to determine its current inflation rate is not the easiest of tasks to accomplish, but it needs to be accomplished in a competent and consistent manner, so that appropriate monetary adjustments could thereby be made, to the degree that such could be done, to keep the inflation rate, range bound, per governmental preferences and commitments.
The problem with noting what inflation is in a given month, or even for a lesser period of time, is that the shorter that period of time is, the more inaccurate the true inflation rate really is, because there certainly are items that are volatile, week-to-week, or even day-to-day. So then, in order to get a fair perspective of what inflation currently is, and thereby the direction that inflation seems to be going, one needs to look at something like the 200 day moving average of inflation; of which, further to the point, this should thereby become the industry standard.
When it comes to the general public, as compared to the government, that general public, seems to, more times than not, have a real good beat on whether inflation is going up or trending down, because their pocketbook tells them so. So too, businesses are known for keeping a very close eye on inflation, because it makes, for example, a material difference in their staffing efforts, along with providing the knowledge so needed to adjust their budget, for the components that they are required to purchase so as to manufacture those products, in addition to the inherent flexibility needed to adjust the price point of those products so being marketed for sale. In short, a stable currency, is usually the preference as well as also being a benefit for people and businesses; but in absence of such, an index which more appropriately measures inflation, is represented well by the 200 day moving average of such.