The Deceptive Stability of the "Underlying Inflation Rate" - 1/25/2026

Abstract

The "underlying inflation rate" is widely used as an indicator of economic stability. However, by ignoring consumer perceptions and excluding certain factors, it actually produces an optimistic assessment that is unrealistic. This indicator functions as a "deceptive price stabilizer," conveniently allowing policymakers to ignore price issues and misleading consumers.

Keywords

Inflation rate, consumer perception, policy, information manipulation, economic stability

Ignoring consumer perceptions

Imagine this: Every morning, you stop by the supermarket and notice the rising prices of eggs, milk, and gasoline. Even though the contents of your shopping cart remain the same, your wallet feels lighter and lighter. Yet, the news reports that "prices are stable." Why? That's the true nature of the "underlying inflation rate." This indicator aims to show long-term price trends by excluding items with volatile prices, such as energy and food. But have you ever considered how unrealistic the exclusion of consumer spending items—something that is most important to them—can lead to unrealistic assessments?

Policymakers' False Sense of Security

In economic policy, underlying inflation provides a sense of security for policymakers. Presuming prices are stable allows them to avoid sudden policy shifts and aggressive interventions. However, this indicator merely portrays an "ideal economic state" that is intentionally disconnected from consumer perceptions. The actual burden on consumers of energy and food is ignored, and policy attempts to maintain a semblance of "stability." However, this stability is merely fictitious, leading to misjudgments of how difficult life actually is.

"Underlying inflation" = (Exclusion of consumer perceptions) ÷ (Maintaining policy stability)

Unconscious Contradictions and Their Impact

Real economic conditions often unfold in unseen ways. Supply-side shocks and fluctuations in raw material prices have serious impacts on consumers' lives, but dismissing them as "temporary" distorts policy assessments. This ignorance accumulates, ultimately leading to distrust in policy itself. Consumers realize that the "underlying inflation rate" is not in line with reality. As the gap widens, policymakers become increasingly disconnected from reality and resort to inaction.

Challenges to Economic Stability

The "underlying inflation rate" indicator, as its name suggests, is meant to convey stability. However, in reality, it creates a misleading sense of stability for society as a whole. As long as policymakers place too much importance on it, actual economic instability is ignored and erroneous policies continue. By intentionally ignoring a portion of prices, consumers' lives appear more stable than they actually are, ultimately causing instability throughout the economy.

Conclusion: A Deceptive Price Stabilizer

In this way, the "underlying inflation rate" is nothing more than a manipulation that does not reflect consumer perceptions. By ignoring actual price fluctuations and underestimating their impact in order to maintain stability, policymakers function as a tool for complacently downplaying price issues. What this indicator shows is not a "stable economy," but rather an "illusory stability" that ignores the urgent needs of consumers.