Staff Reports
Real Time Underlying Inflation Gauges for Monetary Policymakers
December 2009 Number 420
JEL classification: C13, C33, C43, E31, E37

Authors: Marlene Amstad and Simon Potter

Central banks analyze a wide range of data to obtain better measures of underlying inflationary pressures. Factor models have widely been used to formalize this procedure. Using a dynamic factor model this paper develops a measure of underlying inflation (UIG) at time horizons of relevance for monetary policymakers for both CPI and PCE. The UIG uses a broad data set allowing for high-frequency updates on underlying inflation. The paper complements the existing literature on U.S. “core” measures by illustrating how UIG is used and interpreted in real time since late 2005.

Available only in PDFPDF39 pages / 719 kb
By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close