IDEAS home Printed from https://ideas.repec.org/a/fip/fedkeb/96343.html

Will High Underlying Inflation Persist?

Author

Abstract

Underlying inflation—the rate of inflation that prevails after temporary imbalances in the economy are resolved—can help policymakers gauge whether current high rates of inflation are likely to persist. Using survey-based inflation expectations, we show that if current inflation forecasts are realized, underlying inflation should decline toward 2 percent in 2024. However, if inflation continues to surprise to the upside, underlying inflation may remain elevated for some time.

Suggested Citation

  • Amaze Lusompa & Sai Sattiraju, 2023. "Will High Underlying Inflation Persist?," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, May.
    • Handle: RePEc:fip:fedkeb:96343
    as

    Download full text from publisher

    File URL: https://www.kansascityfed.org/Economic%20Bulletin/documents/9519/EconomicBulletin23LusompaSattiraju0510.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joshua C. C. Chan, 2018. "Specification tests for time-varying parameter models with stochastic volatility," Econometric Reviews, Taylor & Francis Journals, vol. 37(8), pages 807-823, September.
    2. James H. Stock & Mark W. Watson, 2007. "Erratum to "Why Has U.S. Inflation Become Harder to Forecast?"," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(7), pages 1849-1849, October.
    3. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bańbura, Marta & Bobeica, Elena, 2023. "Does the Phillips curve help to forecast euro area inflation?," International Journal of Forecasting, Elsevier, vol. 39(1), pages 364-390.
    2. Raffaella Giacomini & Jason Lu & Katja Smetanina, 2024. "Perceived shocks and impulse responses," CeMMAP working papers 21/24, Institute for Fiscal Studies.
    3. Julien Champagne & Guillaume Poulin‐Bellisle & Rodrigo Sekkel, 2020. "Introducing the Bank of Canada staff economic projections database," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(1), pages 114-129, January.
    4. Raffaella Giacomini & Jason Lu & Katja Smetanina, 2024. "Perceived shocks and impulse responses," IFS Working Papers WCWP21/24, Institute for Fiscal Studies.
    5. Joshua C.C. Chan & Rodney W. Strachan, 2023. "Bayesian State Space Models In Macroeconometrics," Journal of Economic Surveys, Wiley Blackwell, vol. 37(1), pages 58-75, February.
    6. Manuel M. F. Martins & Fabio Verona, 2024. "Forecasting Inflation with the New Keynesian Phillips Curve: Frequencies Matter," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(4), pages 811-832, August.
    7. Amaze Lusompa & Sai Sattiraju, 2022. "Cutting-Edge Methods Did Not Improve Inflation Forecasting during the COVID-19 Pandemic," Economic Review, Federal Reserve Bank of Kansas City, vol. 107(no.3), July.
    8. Marta Bañbura & Danilo Leiva-León & Jan-Oliver Menz, 2021. "Do inflation expectations improve model-based inflation Forecasts?," Working Papers 2138, Banco de España.
    9. Alex, Dony, 2021. "Anchoring of inflation expectations in large emerging economies," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    10. Bańbura, Marta & Brenna, Federica & Paredes, Joan & Ravazzolo, Francesco, 2021. "Combining Bayesian VARs with survey density forecasts: does it pay off?," Working Paper Series 2543, European Central Bank.
    11. Hauzenberger, Niko & Huber, Florian & Klieber, Karin & Marcellino, Massimiliano, 2025. "Bayesian neural networks for macroeconomic analysis," Journal of Econometrics, Elsevier, vol. 249(PC).
    12. Drobysheva, Alexandra (Дробышева, Александра) & Merzlyakov, Sergey (Мерзляков, Сергей), 2024. "The Forward Guidance Puzzle and Anchored Inflation Expectations," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, issue 6, pages 6-25.
    13. Chen, Qitong & Hong, Yongmiao & Li, Haiqi, 2024. "Time-varying forecast combination for factor-augmented regressions with smooth structural changes," Journal of Econometrics, Elsevier, vol. 240(1).
    14. Kelly Trinh & Bo Zhang & Chenghan Hou, 2025. "Macroeconomic real‐time forecasts of univariate models with flexible error structures," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 44(1), pages 59-78, January.
    15. Joseph, Andreas & Potjagailo, Galina & Chakraborty, Chiranjit & Kapetanios, George, 2024. "Forecasting UK inflation bottom up," International Journal of Forecasting, Elsevier, vol. 40(4), pages 1521-1538.
    16. Canelli, Rosa & Fontana, Giuseppe & Realfonzo, Riccardo & Passarella, Marco Veronese, 2024. "Energy crisis, economic growth and public finance in Italy," Energy Economics, Elsevier, vol. 132(C).
    17. Stefan Tanevski & Marjan Petreski, 2026. "Wage Rigidity, Exchange Rate Regimes, and Inflation Persistence in Transition Economies: A Cohort-Based Institutional Approach," Papers 2605.16862, arXiv.org.
    18. Blasques, Francisco & van Brummelen, Janneke & Gorgi, Paolo & Koopman, Siem Jan, 2024. "Maximum Likelihood Estimation for Non-Stationary Location Models with Mixture of Normal Distributions," Journal of Econometrics, Elsevier, vol. 238(1).
    19. Adriana Cornea‐Madeira & João Madeira, 2022. "Econometric Analysis of Switching Expectations in UK Inflation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(3), pages 651-673, June.
    20. Matei Demetrescu & Christoph Hanck & Robinson Kruse‐Becher, 2022. "Robust inference under time‐varying volatility: A real‐time evaluation of professional forecasters," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(5), pages 1010-1030, August.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedkeb:96343. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kira Lillard (email available below). General contact details of provider: https://edirc.repec.org/data/frbkcus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.