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Forecasting inflation? Target the middle

Author

Listed:
  • Brent Meyer
  • Guhan Venkatu
  • Saeed Zaman

Abstract

The Median CPI is well-known as an accurate predictor of future infl ation. But it’s just one of many possible trimmed-mean inflation measures. Recent research compares these types of measures to see which tracks future inflation best. Not only does the Median CPI outperform other trims in predicting CPI inflation, it also does a better job of predicting PCE inflation, the FOMC’s preferred measure, than the core PCE.

Suggested Citation

  • Brent Meyer & Guhan Venkatu & Saeed Zaman, 2013. "Forecasting inflation? Target the middle," Economic Commentary, Federal Reserve Bank of Cleveland, issue Apr.
  • Handle: RePEc:fip:fedcec:y:2013:i:apr11:n:2013-05
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    Citations

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    Cited by:

    1. Verbrugge, Randal & Higgins, Amy, 2015. "Tracking Trend Inflation: Nonseasonally Adjusted Variants of the Median and Trimmed-Mean CPI," Working Papers (Old Series) 1527, Federal Reserve Bank of Cleveland.
    2. Amstad, Marlene & Potter, Simon M. & Rich, Robert W., 2014. "The FRBNY staff underlying inflation gauge: UIG," Staff Reports 672, Federal Reserve Bank of New York.

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