Post-COVID Inflation Dynamics: Higher for Longer

نویسندگان

چکیده

In the December 2022 Summary of Economic Projections (SEP), median projection for four-quarter core PCE inflation in fourth quarter 2025 is 2.1 percent. This same SEP has unemployment rising by nine-tenths, to 4.6 percent, end 2023. We assess plausibility this using a specific nonlinear model that embeds an empirically successful Phillips curve specification into structural model, identifying it via underutilized data-dependent method. three components align with those noted Chair Powell his 14, 2022, press conference: housing, goods, and core-services-less-housing. Our projects conditional on rate path rapid deceleration goods prices, moderates only 2.75 percent 2025: will be higher longer. A deep recession would necessary achieve SEP’s projected path. simple reduced-form welfare analysis, which abstracts from any danger expectations becoming unanchored, suggests such not optimal.

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ژورنال

عنوان ژورنال: Working paper

سال: 2023

ISSN: ['2381-6287']

DOI: https://doi.org/10.26509/frbc-wp-202306