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9 posts on "Argia Sbordone"
July 6, 2023

Where Is Inflation Persistence Coming From?

Elevated inflation continues to be a top-of-mind preoccupation for households, businesses, and policymakers. Why has the post-pandemic inflation proved so persistent? In a Liberty Street Economics post early in 2022, we introduced a measure designed to dissect the buildup of the inflationary pressures that emerged in mid-2021 and to understand where the sources of its persistence are. This measure, that we labeled Multivariate Core Trend (MCT) inflation analyzes whether inflation is short-lived or persistent, and whether it is concentrated in particular economic sectors or broad-based.

Posted at 11:00 am in Inflation, Macroeconomics | Permalink
June 2, 2023

MCT Update: Inflation Persistence Declined Significantly in April

Decorative photo: Closeup of sales receipt

This post presents an updated estimate of inflation persistence, following the release of personal consumption expenditure (PCE) price data for April 2023. The estimates are obtained by the Multivariate Core Trend (MCT), a model we introduced on Liberty Street Economics last year and covered most recently in a May post.  The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares. 

Posted at 7:00 am in Inflation, Macroeconomics | Permalink
May 5, 2023

MCT Update: Inflation Persistence Continued to Decline in March

Decorative photo: Closeup of sales receipt

This post presents an updated estimate of inflation persistence, following the release of personal consumption expenditure (PCE) price data for March 2023. The estimates are obtained by the Multivariate Core Trend (MCT), a model we introduced on Liberty Street Economics last year and covered most recently in a March post. The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares. 

Posted at 7:00 am in Inflation, Macroeconomics | Permalink
April 6, 2023

MCT Update: Inflation Persistence Declined Modestly in February

Decorative image: Closeup of sales receipt

This post presents an updated estimate of inflation persistence, following the release of personal consumption expenditure (PCE) price data for February 2023. The estimates are obtained by the Multivariate Core Trend (MCT), a model we introduced on Liberty Street Economics last year and covered most recently in a February post. The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares. 

Posted at 7:00 am in Inflation, Macroeconomics | Permalink
March 9, 2023

Inflation Persistence: Dissecting the News in January PCE Data

decorative photo of a sales receipt with the word price at the top

This post presents updated estimates of inflation persistence, following the release of personal consumption expenditure (PCE) price data for January 2023. The estimates are obtained by the Multivariate Core Trend (MCT), a model we introduced on Liberty Street Economics last year and covered most recently here and here. The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares. 

Posted at 7:00 am in Inflation, Macroeconomics | Permalink
February 7, 2023

Inflation Persistence—An Update with December Data

Decorative image: Digital generated image of vertical bar graph made out of golden cubic blocks with shopping carts standing on them against light blue background. Inflation concept.

This post presents an updated estimate of inflation persistence, following the release of personal consumption expenditure (PCE) price data for December 2022. The estimates are obtained by the Multivariate Core Trend (MCT), a model we introduced on Liberty Street Economics last year and covered most recently in a January post. The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares. 

Posted at 7:00 am in Inflation | Permalink | Comments (1)
January 5, 2023

The Layers of Inflation Persistence

Decorative photo: Closeup of red onion layers texture abstract background

In a recent post, we introduced the Multivariate Core Trend (MCT), a measure of inflation persistence in the core sectors of the personal consumption expenditure (PCE) price index. With data up to February 2022, we used the MCT to interpret the nature of post-pandemic price spikes, arguing that inflation dynamics were dominated by a persistent component largely common across sectors, which we estimated at around 5 percent. Indeed, over the year, inflation proved to be persistent and broad based, and core PCE inflation is likely to end 2022 near 5 percent. So, what is the MCT telling us today? In this post, we extend our analysis to data through November 2022 and detect signs of a decline in the persistent component of inflation in recent data. We then dissect the layers of inflation persistence to fully understand that decline.

April 20, 2022

Inflation Persistence: How Much Is There and Where Is It Coming From?

The surge in inflation since early 2021 has sparked intense debate. Would it be short-lived or prove to be persistent? Would it be concentrated within a few sectors or become broader? The answers to these questions are not so clear-cut. In our view, one should ask how much of the inflation is persistent and how much of it is broad-based. In this post, we address this question through a quantitative lens. We find that the large ups and downs in inflation over the course of 2020 were largely the result of transitory shocks, often sector-specific. In contrast, sometime in the fall of 2021, inflation dynamics became dominated by the trend component, which is persistent and largely common across sectors.

Posted at 7:00 am in Inflation, Macroeconomics, Pandemic | Permalink
August 14, 2015

The Monetary Policy Advice Process at the New York Fed

Research economists discuss their process for providing advice on monetary policy to the New York Fed president ahead of FOMC meetings.

Posted at 10:00 am in Monetary Policy | Permalink
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