Food Prices, Core Inflation, and Inflation Expectations in the United States

Using partially identified Bayesian structural vector autoregressions, we examine how food price shocks have influenced core inflation and inflation expectations in the United States since 1990. This is important, given the conspicuousness of food prices and the substantial share of food expenditure in households' budgets. Shocks raised one‐year expectations immediately, with effects lasting nine quarters; they increased core inflation with a short delay. Long‐term expectations were largely unaffected. Counterfactuals show that one‐year expectations would have been lower in 2020 and 2022 without these shocks. The findings suggest food price shocks warrant a measured response, not an overreaction, from central banks.