Sawbones,

Food and fuel were seperated out from 'core' inflation, because they have had great price fluctuations... in the past. Fruits and vegetables used to be quite seasonal as was spending on fuel (lots of demand for heating oil in the winter, not so much in summer). And, in order to not have inflation soaring one month and crashing the next, they removed those two categories to 'smooth' things out. These kinds of statistical adjustments are also made for retail sales figures and employment (i.e. Christmas shopping and kids finding jobs during the summer).

The logic has broken down now in inflation calculations since food and fuel costs are now trending up quite steeply. So, you're right in thinking that the core inflation figures understate what's going on.