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David,
The key question is: is the increase in food prices an absolute or a relative price increase? Is it caused by things such as US government ethanol policy, and a change in third world diets as their populations become wealthier? Or is it caused by an inflation in the money supply, which has found it’s way into commodity futures and farmland? If it’s the first case, then I would argue that core inflation is still a valid concept, because why should the Fed orient policy based on Chinese diets or farm state politics? If it’s the second case, then one should absolutely disregard core, and focus on headline inflation.
I don’t know how to discern how much of the increase in food prices is a result of each of these factors, given that some of them are somewhat non-quantitative. Perhaps one could devise some sort of multi-factor regression to try and answer this question.
In any case, Happy Easter to you and your readers.
Steve