Author Description

As U.S. core inflation measures have declined in recent years, analysts have renewed their efforts to understand inflation dynamics. This article calculates & plots the precise contributions of major consumer expenditure categories to core inflation measures over time. This technique highlights the underlying trends in inflation, enabling analysts to make more informed inferences about the near-term direction of inflation. It also allows analysts to distinguish broad-based changes in inflation from changes due to relative price movements of a few components. Over the long term, the composition of core services inflation has remained relatively stable while the composition of core goods inflation has changed dramatically. Charts & tables.