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Measuring the underlying component of inflation
[Mesurer la composante sous-jacente de l’inflation]

Author

Listed:
  • Matthew Fontes Baptista
  • Stéphane Lhuissier
  • Matteo Mogliani

Abstract

Central banks use a range of underlying inflation indicators to measure inflationary pressures over the medium term. These indicators generally exclude the most volatile components of the Harmonised Index of Consumer Prices (HICP), such as food and energy. However, they do not necessarily exclude other transitory components that can give an incorrect signal of where inflation will stand in the medium term. Economists have therefore proposed alternative indicators that filter out these temporary movements, such as the “Persistent and Common Component of Inflation” (PCCI), and “Multivariate Core Trend” (MCT) inflation. This article provides a review of the indicators monitored and developed by the Banque de France, focusing in particular on developments in France and the euro area in the post-pandemic period. Les banques centrales s’appuient sur une palette d’indicateurs d’inflation sous jacente afin d’évaluer les pressions inflationnistes à moyen terme. Ces indicateurs excluent généralement les postes de l’indice des prix à la consommation harmonisé (IPCH) les plus volatils, tels que les prix des produits alimentaires et énergétiques. Cependant, ils n’excluent pas nécessairement les autres composantes transitoires de l’inflation qui peuvent fournir un signal erroné sur le niveau auquel l’inflation s’établira à moyen terme. D’autres indicateurs ont donc été proposés, tels que la « composante commune et persistante de l’inflation » (PCCI) et l’« inflation sous jacente tendancielle multivariée » (MCT), qui purgent ces mouvements temporaires. Le présent article propose de passer en revue l’ensemble de ces indicateurs suivis et développés à la Banque de France, avec un regard particulier sur l’évolution en France et en zone euro pendant la période post pandémique.

Suggested Citation

  • Matthew Fontes Baptista & Stéphane Lhuissier & Matteo Mogliani, 2024. "Measuring the underlying component of inflation [Mesurer la composante sous-jacente de l’inflation]," Bulletin de la Banque de France, Banque de France, issue 253.
  • Handle: RePEc:bfr:bullbf:2024:253:05
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    File URL: https://www.banque-france.fr/system/files/2024-09/BDF253-5_EN_Underlying-inflation.pdf
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    File URL: https://www.banque-france.fr/system/files/2024-07/BDF253-5_Inflation-sous-jacente_web.pdf
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    References listed on IDEAS

    as
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