Journal Article

Are some prices in the CPI more forward looking than others? We think so

Abstract: Some of the items that make up the Consumer Price Index change prices frequently, while others are slow to change. We explore whether these two sets of prices - sticky and flexible - provide insight on different aspects of the inflation process. We find that sticky prices appear to incorporate expectations about future inflation to a greater degree than prices that change on a frequent basis, while flexible prices respond more powerfully to economic conditions?economic slack. Importantly, our sticky-price measure seems to contain a component of inflation expectations, and that component may be useful when trying to gauge where inflation is heading.

Keywords: Inflation (Finance); Consumer price indexes;

https://doi.org/10.26509/frbc-ec-201002

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2010-05-19

Volume: 2010

Issue: 02

Pages: 6