Theoretically, the core inflation rate more accurately reflects the increase in costs without factoring in the capricious nature of weather and political winds that impact food and fuel costs.
"Food and energy prices are quite random," says Hampel. "Usually our best guess of inflation going forward for the next few months is anchored at the core rate."
Nevertheless, food and energy prices have increased at a much quicker pace than core items. Food prices increased at nearly twice the rate of core inflation over the past year, rising 1.8 percent compared to the core inflation rate of 1 percent for the year ending in January.
But that's nothing compared to fuel costs. "The big culprit has been energy prices, which are up 7.3 percent" over the same time frame, says Hampel.
"If food and energy are going up faster than 1 percent and everything not counting them is going up at a little less than 1 percent, that is how we get the overall inflation rate of 1.6 percent," he says.
Raw materials vs. the price consumers pay
If you're an average American consumer, as envisioned by the Bureau of Labor Statistics, about 15 percent of your total spending goes to food, including eating out. Food commodities account for only a fraction of that expenditure. Depending on your diet, the from-the-farm cost of food could account for less than 20 percent of your grocery bill.
Some food products, such as coffee, may rise more than the USDA's forecasted 4 percent.
In the case of coffee beans, the market hit a 13-year high last summer and companies such as J.M. Smucker and Kraft Foods Inc. increased prices on brands Folgers, Dunkin' Donuts and Millstone. Green Mountain Coffee raised the price on some of their coffee brands by as much as 15 percent.
Prices have continued to increase. According to the International Coffee Organization, the main international coffee trade group, the ICO daily composite indicator price hit 222.89 cents per pound in early March. Back in September 2010, the average was 163.61 cents per pound. The highest price the ICO has on record was 326.50 cents per pound on April 14, 1977.