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What Is Driving Inflation—Besides the Usual Culprits?

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  • Christopher D. Cotton
  • Vaishali Garga

Abstract

The prices of services associated with low-skill workers have been a key driver of “supercore” inflation, which excludes food, energy prices, and shelter prices. Low-skill-services inflation seems to be tied to faster wage growth in those industries coming out of the COVID-19 pandemic. Wage growth in low-skill services has begun to decline, suggesting that there may be lower inflation in these industries going forward. At the same time, wage growth in high-skill services has recently accelerated, suggesting that there may be higher inflation in these industries in the near future.

Suggested Citation

  • Christopher D. Cotton & Vaishali Garga, 2023. "What Is Driving Inflation—Besides the Usual Culprits?," Current Policy Perspectives 96859, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbcq:96859
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    References listed on IDEAS

    as
    1. Christopher D. Cotton & John O'Shea, 2023. "Forecasting CPI Shelter under Falling Market-Rent Growth," Current Policy Perspectives 95664, Federal Reserve Bank of Boston.
    2. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1415-1464.
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    More about this item

    Keywords

    Inflation; CPI; supercore;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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