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Understanding Inflation via Developments in Market and Nonmarket Inflation Rates

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  • Randal J. Verbrugge
  • Saeed Zaman

Abstract

This Economic Commentary examines the recent behavior and the longer-term properties of market-based and non-market-based inflation series, including their cyclical properties, historical revisions, and predictive power in explaining future PCE inflation. The examination reveals a statistically significant association between market-based PCE inflation and estimates of labor market slack, and a strong positive association between movements in the stock market and in some of the financial services components of non-market-based PCE inflation. Disinflation in overall PCE inflation over the course of 2023 and 2024 was largely driven by disinflation in the market-based components, coinciding with a gradual loosening in labor market conditions.

Suggested Citation

  • Randal J. Verbrugge & Saeed Zaman, 2025. "Understanding Inflation via Developments in Market and Nonmarket Inflation Rates," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2025(09), pages 1-8, September.
    • Handle: RePEc:fip:fedcec:101764
    DOI: 10.26509/frbc-ec-202509
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    References listed on IDEAS

    as
    1. Mark Bognanni, 2020. "A Forecasting Assessment of Market-Based PCE Inflation," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2020(01), January.
    2. Daniel R. Carroll & Randal J. Verbrugge, 2019. "Behavior of a New Median PCE Measure: A Tale of Tails," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2019(10), July.
    3. Saeed Zaman, 2019. "Cyclical versus Acyclical Inflation: A Deeper Dive," Economic Commentary, Federal Reserve Bank of Cleveland, issue September.
    4. Verbrugge, Randal & Zaman, Saeed, 2023. "The hard road to a soft landing: Evidence from a (modestly) nonlinear structural model," Energy Economics, Elsevier, vol. 123(C).
    5. James H. Stock & Mark W. Watson, 2020. "Slack and Cyclically Sensitive Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(S2), pages 393-428, December.
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    Cited by:

    1. Sylvain Leduc & Luiz E. Oliveira, 2026. "Monetary Policy Through the Lens of Market-Based Inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2026(09), pages 1-6, April.

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