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Does headline inflation converge to core?

Author

Listed:
  • Zheng Liu
  • Justin Weidner

Abstract

Recent surges in food and energy prices have pushed up headline inflation to levels well above its underlying trend. In contrast, core inflation, which excludes food and energy prices, has remained low and stable. Historical data suggest that, since the early 1990s, headline inflation has tended to converge toward core inflation. Thus, high inflation is unlikely to persist as long as inflation expectations remain anchored.

Suggested Citation

  • Zheng Liu & Justin Weidner, 2011. "Does headline inflation converge to core?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue aug1.
  • Handle: RePEc:fip:fedfel:y:2011:i:aug1:n:2011-24
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    References listed on IDEAS

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    1. Olivier J. Blanchard & Jordi Gali, 2007. "The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?," NBER Working Papers 13368, National Bureau of Economic Research, Inc.
    2. Athanasios Orphanides & John C. Williams, 2007. "Inflation targeting under imperfect knowledge," Economic Review, Federal Reserve Bank of San Francisco, pages 1-23.
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    Cited by:

    1. Williams, John C., 2015. "The view from here: outlook and monetary policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    2. Williams, John C., 2015. "Looking forward: the path for monetary policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    3. Williams, John C., 2015. "The view from here: the economic outlook and its implications for monetary policy," Speech 135, Federal Reserve Bank of San Francisco.
    4. Mazumder, Sandeep, 2014. "The sacrifice ratio and core inflation," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 400-421.
    5. Williams, John C., 2015. "Looking forward, forward looking: the path for monetary policy," Speech 138, Federal Reserve Bank of San Francisco.

    More about this item

    Keywords

    Inflation (Finance);

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