Inflation Persistence: How Much Is There and Where Is It Coming From?

Martin Almuzara and Argia Sbordone

No 20220420, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The surge in inflation since early 2021 has sparked intense debate. Would it be short-lived or prove to be persistent? Would it be concentrated within a few sectors or become broader? The answers to these questions are not so clear-cut. In our view, one should ask how much of the inflation is persistent and how much of it is broad-based. In this post, we address this question through a quantitative lens. We find that the large ups and downs in inflation over the course of 2020 were largely the result of transitory shocks, often sector-specific. In contrast, sometime in the fall of 2021, inflation dynamics became dominated by the trend component, which is persistent and largely common across sectors.

Keywords: trend inflation; sectoral inflation; common persistence (search for similar items in EconPapers)
JEL-codes: B22 E2 (search for similar items in EconPapers)
Date: 2022-04-20
New Economics Papers: this item is included in nep-mac and nep-mon
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