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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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