AbstractAs U.S. core inflation measures have declined in recent years, analysts have renewed their efforts to understand inflation dynamics. A common approach to this issue is to make inferences about how price changes of major components affect the aggregate inflation rate. This article takes a more rigorous approach, calculating and plotting the precise contributions of major consumer expenditure categories to core inflation measures over time. ; This technique has distinct advantages. It highlights the underlying trends in inflation, enabling analysts to make more informed inferences about the near-term direction of inflation. It also allows analysts to distinguish broad-based changes in inflation from changes due to relative price movements of a few components. ; The analysis focuses on the core components of the consumer price index (CPI) and the personal consumption expenditures price index (PCEPI). Over the long term, the authors note, the composition of core services inflation has remained relatively stable while the composition of core goods inflation has changed dramatically. Over the 2002–03 period, movements in core inflation measures resulted mainly from significant relative price changes of two components that were persistent enough to alter the path of core inflation for a sustained period, the authors conclude. ; The results of this study highlight the importance of gauging the impact of relative changes in a low-inflation environment and suggest that recent concern about overall price deflation was perhaps overstated.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of Atlanta in its journal Economic Review.
Volume (Year): (2004)
Issue (Month): Q 1 ()
Pages: 39 - 51
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Todd E. Clark, 1999. "A comparison of the CPI and the PCE price index," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 15-29.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.