Working Papers

2020-29 | August 2020


A Simple Framework to Monitor Inflation


This paper proposes a simple framework to help monitor and understand movements in PCE inflation in real time. The approach is to decompose inflation using simple categorical-level regressions or systems of equations. The estimates are then used to group categories into components of PCE inflation. I review some applications of the methodology, and show how it can help explain inflation dynamics over recent episodes. The methodology shows that inflation remained low in the mid-2010s primarily because of factors unrelated to aggregate economic conditions. I also apply the methodology to the Covid-19 pandemic. The decomposition reveals that a majority of the drop in core PCE inflation after the onset of the pandemic was attributable to an initial strong decline in consumer demand, which more recently has rebounded somewhat.

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Article Citation

Shapiro, Adam Hale. 2020. "A Simple Framework to Monitor Inflation," Federal Reserve Bank of San Francisco Working Paper 2020-29. Available at