Why does core inflation exclude food and energy prices?

Core inflation is measured using the CPI (consumer product index) and removes items that fluctuate violently or frequently such as oil and food. Not including energy and food in the core inflation calculation gives a more stable percent as a base.

Although, I differ that inflation excludes food, energy at al, there are some fundamental conceptual issues discussed in link below:
http://research.stlouisfed.org/publications/review/08/05/part2/Wynne.pdf

The article Jeeva Rangaraju points to by Mark Wayne is excellent. Indeed food and energy are excluded from the American "core inflation" calculation, in part at least, because they are so inextricably tied to each other. The Consumer Price Index (CPI) has been considerably manipulated by the parties in power at the time over the last 50 years for largely political reasons: to make their party look "good" (better than the "other guys") and thus to give them an advantage in any upcoming elections (including in some cases establishing early in their incumbency that they had defeated the inflation that plagued the prior administration).

In fact, the exclusion of food and energy began with the volatility of the 1970's. This volatility was introduced largely by the Organization of Petroleum Exporting Countries (better known as OPEC) placing an embargo on petroleum exports to the United States in an attempt to pressure the US into withdrawing support from the state of Israel (at the time of the Yom Kippur War). The resulting line up of motorists at filling stations was considered a great hardship by most consumers, especially because the relatively sudden rise in oil prices (despite anti-price gouging regulations) also affected the costs for food manufacturers, retailers and farmers. When the Iran hostage crisis again brought on an oil shortage in 1979, it triggered subsequent "fiddling" with the market basket of goods further by substituting "popular" alternative "choices" like chicken replacing beef for part of the protein portion of food. Such "choices" actually tended to be because family budgets were so squeezed by the inflation that items that had previously been affordable staples had become luxury items relative to middle class income levels. Eventually, the "real" inflation was essentially ignored with public attention being re-focused on the "core inflation" rate which excluded food and energy altogether.

Another distortion of "core inflation" is the fact that it only considers "rental" housing, not fluctuations in owner occupied housing. Nor does it (to the best of my knowledge) reflect indirect taxes (for instance; property taxes do get incorporated in rental rates but not owner occupied) or income taxes, which under the Eisenhower administration were as high as 90% in uppermost brackets, but have declined to less than half that now. Failure to include these various factors distorts any true measure of average "disposable income" for discretionary spending.

At least a couple of economists I have spoken with tend to think that the Producer Price Index (PPI) is a more accurate gauge of real inflation. On the other hand "real inflation" is an imaginary number (sorry, math joke there). Actual inflation is incorporated into the economic system known as "capitalism" as one of the ways in which "capital" is created. In a capitalist system, inflation is strutural.

Statistics, especially official government statistics, like any "history" is just the lies told by the people who won the wars, and their descendants, regardless of the outcome of the actual battles.

It makes sense to measure inflation in multiple ways to see its impact on our overall economy. One way that it is common to measure inflation is to see how it affects the goods and services we buy without the impact of volatile food and energy prices that fluctuate based on availability and time of year. There is no perfect way to view inflation, and in fact that actual impact on any person or family may be much different. However the government and Federal Reserve set their policies based on analysis of broad indicators. The Fed may not change its monitary policy based on food and energy inflation, but if manufactured and imported good prices rise too quickly, it may increase interest rates to dampen inflationary demand. These kinds of price raises tend to be more permanent and therefore of more long term concern.

Inflation on an individual level can be influenced by our choices. Higher prices can be offset by substitution, conservation or abstenence. We practice all three of these when we pass up apples for bananas in the supermarket, deciding to carpool to work to save gas or do without the weekly movie when the price goes up.

A cynic would say that core inflation excludes food and energy so that the government can avoid increasing entitlement payments that are indexed to inflation. Simply, if gas prices go up, they don't want to have to pay more in Social Security benefits. By excluding some of the main commodities purchased by most of the public, it also makes it easier to hide the effects of deliberate government inflation such as the Fed's QE2 program (so-called "printing of money").

I'll leave it to the audience to determine whether I'm a cynic or not.