Journal Article

Will High Underlying Inflation Persist?

Abstract: Underlying inflation—the rate of inflation that prevails after temporary imbalances in the economy are resolved—can help policymakers gauge whether current high rates of inflation are likely to persist. Using survey-based inflation expectations, we show that if current inflation forecasts are realized, underlying inflation should decline toward 2 percent in 2024. However, if inflation continues to surprise to the upside, underlying inflation may remain elevated for some time.

Keywords: monetary policy; inflation; underlying inflation;

JEL Classification: E31; E52; B22;

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Bulletin

Publication Date: 2023-05-10

Pages: 4