Are some prices in the CPI more forward looking than others? We think so
AbstractSome 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.
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Bibliographic InfoArticle provided by Federal Reserve Bank of Cleveland in its journal Economic Commentary.
Volume (Year): (2010)
Issue (Month): May 19 ()
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