Search Results
Briefing
Relative Price Changes Are Unlikely to Account for Recent High Inflation
March 2021 marked the first month of the ongoing high inflation episode in the U.S. Last September, I analyzed the first five months of this episode through the lens of the distribution of price changes for all PCE components. A small fraction of expenditures accounted for much of the high inflation in those months. In this Economic Brief, I provide a related analysis and incorporate a new summary statistic for the distribution of relative price changes. In the last four months, high inflation has not been concentrated in a small fraction of expenditures, deviating from the relationship we ...
Journal Article
Inflation targeting and revisions to inflation data: a case study with PCE inflation
Central banks around the world have come to recognize the importance of maintaining low and stable inflation. One widely employed tool for helping to do so is known as inflation targeting, whereby a central bank sets a numeric goal for inflation. Once this target is publicly stated, the bank can be held accountable for its actions in regard to meeting, or not meeting, this target. Countries that have adopted such a tool have generally had a favorable experience, and there is evidence that inflation targeting is correlated with increased stability in output growth, lower inflation, and more ...
Working Paper
A Simple Framework to Monitor Inflation
This paper proposes a simple framework to help monitor and understand movements in PCE inflation in real time. The approach is to decompose inflation using simple categorical-level regressions or systems of equations. The estimates are then used to group categories into components of PCE inflation. I review some applications of the methodology, and show how it can help explain inflation dynamics over recent episodes. The methodology shows that inflation remained low in the mid-2010s primarily because of factors unrelated to aggregate economic conditions. I also apply the methodology to ...
Report
A Faster Convergence of Shelter Prices and Market Rent: Implications for Inflation
The Federal Reserve currently faces a “last-mile” problem in bringing inflation back to its 2 percent target. Following the series of federal funds rate hikes that began in March 2022 and ended in July 2023, core (excluding food and energy) Personal Consumption Expenditure (PCE) inflation dropped from a year-over-year peak of 5.6 percent in February 2022 to 2.9 percent in December 2023. At the end of 2023, hopes were high that falling inflation would allow the Fed to cut interest rates several times in 2024. However, the disinflation process slowed noticeably in early 2024, prompting ...
Report
Forecasting CPI Shelter under Falling Market-Rent Growth
Shelter (housing) costs constitute a large component of price indexes, including 42 percent of the widely followed core Consumer Price Index (CPI). The shelter prices measured in the CPI capture new and existing renters and tend to lag market rents. This lag explains how in recent months the shelter-price index (CPI shelter) has accelerated while market rents have pulled back. We construct an error correction model using data at the metropolitan statistical area level to forecast how CPI shelter will evolve. We forecast that CPI shelter will grow 5.88 percent from September 2022 to September ...