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SF Fed Paper On Inflation Becoming More Persistent

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  • Latest SF Fed research shows a greater degree of persistence in inflation shocks, evidenced by consecutive changes in monthly inflation rates tending to move increasingly in the same direction.
  • Looking at the rise in the contribution of persistent shocks to PCE inflation (Fig.4), an uptrend was already underway prior to an acceleration with the pandemic, having first started increasing in mid-2019.
  • The move higher through the pandemic has been clear to see in long-term market inflation expectations, which although cooling notably over the past month are still higher than pre-Covid levels, with the 5Y5Y breakeven at 2.26%.

https://www.frbsf.org/economic-research/publications/economic-letter/2022/may/untangling-persistent-versus-transitory-shocks-to-inflation/



5Y and 5Y5Y forward inflation breakevenSource: Bloomberg

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