Measuring Inflation Shock Momentum

Kevin Lansing and Adam Shapiro

No 2026-10, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We develop a non-parametric filter that identifies sustained directional runs in shocks to monthly inflation—a concept we define as “inflation shock momentum.” By assessing the shocks to over 100 disaggregated Personal Consumption Expenditures (PCE) inflation categories, we isolate the share of categories experiencing positive or negative inflation shock momentum in a given month. We define the “Inflation Shock Momentum” (ISM) index as the net positive momentum share of expenditure-weighted categories (positive minus negative) in a given month. We show that the ISM index helps to forecast aggregate PCE inflation at horizons of 1 to 3 years, even after controlling for a variety of other inflation predictor variables. The ISM index is particularly useful in capturing emerging disinflationary pressure and can be used to help forecast future inflation movements in real time.

Keywords: PCE Inflation; Non-parametric filter; Forecasting (search for similar items in EconPapers)
JEL-codes: C14 C53 E31 E37 E52 (search for similar items in EconPapers)
Pages: 41
Date: 2026-04-30
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:103112

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DOI: 10.24148/wp2026-10

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