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Pass-Through of Wages and Import Prices Has Increased in the Post-COVID Period

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Abstract

Annual CPI inflation reached 9.1 percent in June 2022, the highest reading since November 1981. The broad-based nature of the recent inflation readings has increased concerns that inflation may run above the Federal Reserve’s target for a longer period than anticipated. In this post we use detailed industry-level data to examine two prominent cost-push-based explanations for high inflation: rising import prices and higher labor costs. We find that the pass-through of wages and input prices to the U.S. Producer Price Index has grown during the pandemic. Both the large changes in these costs and a higher pass-through into domestic prices have contributed toward higher inflation.

Suggested Citation

  • Mary Amiti & Sebastian Heise & Fatih Karahan & Ayşegül Şahin, 2022. "Pass-Through of Wages and Import Prices Has Increased in the Post-COVID Period," Liberty Street Economics 20220823, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:94677
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    File URL: https://libertystreeteconomics.newyorkfed.org/2022/08/pass-through-of-wages-and-import-prices-has-increased-in-the-post-covid-period/
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    More about this item

    Keywords

    wages; import prices; inflation; Pass-through;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F00 - International Economics - - General - - - General

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