Inflation Persistence: Dissecting the News in January PCE Data

Martin Almuzara and Argia Sbordone

No 20230309, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: This post presents updated estimates of inflation persistence, following the release of personal consumption expenditure (PCE) price data for January 2023. The estimates are obtained by the Multivariate Core Trend (MCT), a model we introduced on Liberty Street Economics last year and covered most recently here and here. The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares.

Keywords: inflation persistence; data revisions; personal consumption expenditures (PCE) (search for similar items in EconPapers)
JEL-codes: E2 E31 (search for similar items in EconPapers)
Date: 2023-03-09
New Economics Papers: this item is included in nep-mon
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