Are some prices in the CPI more forward looking than others? We think so

Michael F. Bryan and Brent Meyer

Economic Commentary, 2010, vol. 2010, issue 02, 6

Abstract: Some of the items that make up the Consumer Price Index change prices frequently, while others are slow to change. We explore whether these two sets of prices - sticky and flexible - provide insight on different aspects of the inflation process. We find that sticky prices appear to incorporate expectations about future inflation to a greater degree than prices that change on a frequent basis, while flexible prices respond more powerfully to economic conditions?economic slack. Importantly, our sticky-price measure seems to contain a component of inflation expectations, and that component may be useful when trying to gauge where inflation is heading.

Keywords: Inflation (Finance); Consumer price indexes (search for similar items in EconPapers)
Date: 2010
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DOI: 10.26509/frbc-ec-201002

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