IDEAS home Printed from https://ideas.repec.org/p/bca/bocsap/26-43.html

Segmented Inflation Dynamics (SID): Identifying Trend Inflation from the Price Index

Author

Listed:
  • André Binette
  • Colleen Smith

Abstract

This note presents Segmented Inflation Dynamics (SID), a data-driven tool for assessing trend inflation. SID uses time-series segmentation to divide the price index into contiguous segments with stable inflation rates. The segmentation breaks are identified from the data. The slope of each segment provides a well-defined estimate of trend inflation that is stable but responsive to persistent shifts. Using Canadian data from 1992 to 2025, the note describes the resulting inflation segments, tests the robustness of the method and assesses its real-time properties. Results show that SID offers a stable, interpretable measure of trend inflation, with limited sensitivity to short-term volatility and quick adjustment to shifts in inflation dynamics. Based on data through December 2025, SID indicates that Canada’s trend inflation has been near 2 percent since early 2024.

Suggested Citation

  • André Binette & Colleen Smith, 2026. "Segmented Inflation Dynamics (SID): Identifying Trend Inflation from the Price Index," Staff Analytical Papers 2026-43, Bank of Canada.
    • Handle: RePEc:bca:bocsap:26-43
    DOI: 10.34989/sap-2026-43
    as

    Download full text from publisher

    File URL: https://doi.org/10.34989/sap-2026-43
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.34989/sap-2026-43?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E - Macroeconomics and Monetary Economics
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    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:bca:bocsap:26-43. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bocgvca.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.