Turning Points in Inflation: A Structural Breaks Approach with Micro Data

Alberto Cavallo and Gaston Garcia Zavaleta

No 34102, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We introduce a novel methodology for detecting inflation turning points that com-bines high-frequency, disaggregated price data with standard structural break techniques to provide policymakers with more timely and precise signals of inflation dynamics. The methodology consists of three key components: measuring inflation as the slope of the log price index rather than using conventional inflation rates, employing structural break techniques to detect shifts in this slope, and leveraging highly disaggregated price indexes to identify trend breaks at a granular level. We apply this approach to study two critical recent episodes: Argentina’s 2024–2025 disinflation and the inflationary impact of U.S. tariff adjustments in 2025. For Argentina, we detect a broad-based disinflationary turning point in May 2024. For the U.S., we find evidence of a turning point in February 2025, with significant sectoral inflation accelerations despite stable aggregate inflation measures. These applications demonstrate the utility of our approach for enhancing real-time inflation monitoring and policy decision-making.

JEL-codes: C22 C55 E31 (search for similar items in EconPapers)
Date: 2025-08
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