December 31, 2009
* Real Time Underlying Inflation Gauges for Monetary Policymakers

Federal Reserve Bank of New York Staff Reports, Real Time Underlying Inflation Gauges for Monetary Policymakers, Marlene Amstad, Simon Potter, Staff Report no. 420, December 2009

  • "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 Consumer Price Index (CPI) and Personal Consumption Expenditure
    De‡ator (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."

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