![]() The easiest way to test if the metric is reliable is to look at the correlations between the sticky and flexi series. Secondly, I’m going to use it to predict future sticky price inflation. First, I am going to look at the reliability of the Fed’s metric for forecasting purposes. They are also the prices that spur consumers to demand wage hikes - and that can, as we noted before, trigger a dreaded wage-price spiral where inflation becomes entrenched. These prices are typically ‘administered’ by corporations and set, not in line with supply and demand, but strategically in order to maximise sales and not alienate consumers. These are the prices end consumer typically see at the checkout. Think: energy, used cars, food etc - all the stuff that took a big hit due to the lockdowns and the Russian invasion of Ukraine.īut in recent months, sticky prices have started to respond. These are mostly goods that have volatile prices and are priced on markets driven by supply and demand. As we can see, until recently, inflation only seemed to be taking place in flexi price markets.
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