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posted on 30 September 2017

A Monthly Underlying Inflation Gauge

from Liberty Street Economics

-- this post authored by Robert Rich

This marks the launch of the monthly publication of the Underlying Inflation Gauge (UIG). We are reporting two UIG measures, described recently on Liberty Street Economics, that are constructed to provide an estimate of the trend, or persistent, component of inflation. One measure is derived using a large number of disaggregated price series in the consumer price index (CPI), while the second measure incorporates additional information from macroeconomic and financial variables.

The trend component of inflation plays a critical role in many economic and financial decisions. Because this variable is not directly observed, researchers have proposed a number of approaches to estimate it. An attractive feature of the UIG is that it identifies sustained movements in inflation using information from a large data set. It has also shown more accurate forecasts of inflation compared with core inflation measures. More extensive discussion of the UIG’s design and usefulness for policymakers, market participants, and the public can be found in a new article in the New York Fed’s Economic Policy Review as well as in this staff report.

The monthly publication will feature a chart depicting the behaviors of CPI inflation and the UIG measures, and will include commentary and various summary points relating to the statistical framework and methodology employed. For those interested in using the inflation gauge for analysis, we are excited to announce that we will post spreadsheet data containing the values of the UIG measures, with estimates going back to 1995. In addition, we will begin to archive the corresponding report and spreadsheet data set for each monthly release.

The UIG measures will be estimated after the monthly release of the CPI report from the U.S. Bureau of Labor Statistics and will be posted that afternoon at 2:30 p.m. - subject to restrictions on communications during blackout periods surrounding Federal Open Market Committee meetings. When such restrictions apply, we will post the UIG measures on the first morning following the end of a blackout period at 7:00 a.m. (which will typically be a Friday). The UIG web page on the New York Fed’s public website provides a publication schedule for the monthly reports.


The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.


About the Author

Rich_robertRobert Rich is an assistant vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

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