Discussion Paper

Inflation Persistence: Dissecting the News in January PCE Data

Abstract: This post presents updated estimates of inflation persistence, following the release of personal consumption expenditure (PCE) price data for January 2023. The estimates are obtained by the Multivariate Core Trend (MCT), a model we introduced on Liberty Street Economics last year and covered most recently here and here. The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares.

Keywords: inflation persistence; data revisions; personal consumption expenditures (PCE);

JEL Classification: E31; E2;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2023-03-09

Number: 20230309