Three forecasting models suggest inflation is likely to remain low, but not as low as early this year, according to Federal Reserve Bank of Cleveland
The researchers also assess whether recent low inflation is the result of a decline in trend inflation, a temporary deviation from trend, or both.
The Federal Reserve's Federal Open Market Committee (FOMC) has set a long-run objective for consumer price inflation of 2%. For some time, most measures of inflation in the US have fallen short of this objective.
Using three different models that "stand out for forecasting relatively well," Federal Reserve Bank of Cleveland researchers Todd Clark and William Bednar assess what each model says about the current trend rate of inflation and what each implies for the inflation outlook. (Trend inflation is the inflation rate that would be expected to prevail after temporary factors influencing the inflation rate subside.)
While the three models imply slightly different outlooks for inflation over the next few years, the researchers note that, "By any measure we have considered, recent inflation trends suggest inflation is likely to remain low in coming quarters, although not as low as it was early this year."
