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Underlying Inflation: An Ensemble Averaging Approach

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Abstract

Following the pandemic, inflation has been high and variable. Future inflation likely depends on expected or underlying inflation—the inflation rate that would prevail in the absence of resource slack, supply shocks, and other temporary disturbances to inflation. We introduce a new estimate of underlying inflation, which we produce by averaging many individual estimates from statistical filters and macroeconometric models. We estimate that between 2019 and 2022 underlyling inflation moved up from 1.8 to 2.1 percent and the risks around it increased and became skewed to the upside. Underlying inflation has remained at 2.1 percent since 2022, although risks around it have decreased in magnitude and become balanced.

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  • Gianni Amisano & Travis J. Berge & Simon C. Smith, 2025. "Underlying Inflation: An Ensemble Averaging Approach," FEDS Notes 2025-03-25, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:2025-03-25
    DOI: 10.17016/2380-7172.3756
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