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Science

Board of Governors of the Federal Reserve System

09/19/2025 | Press release | Distributed by Public on 09/19/2025 13:17

Core Inflation in the Advanced Economies: A Regional Perspective

September 2025

Core Inflation in the Advanced Economies: A Regional Perspective

Daniel O. Beltran and Julio L. Ortiz

Abstract:

We explore differences in the dynamics of core inflation between Europe and North America using a Bayesian time series filter that decomposes the level of core inflation in the major advanced economies into regional, global, and country-specific components. We find a prominent role for both regional and global factors. Historically, the two regional components have at times diverged. Using reduced-form regressions, we examine the economic drivers behind the changes in our estimated global and regional components of U.S. core inflation, focusing on the post-pandemic inflation surge and subsequent pullback. The global component is associated with global supply frictions and past energy shocks. The North American regional component is associated with labor market tightness in the region.

Keywords: Regional inflation. Dynamic Linear Model. Core inflation.

DOI: https://doi.org/10.17016/IFDP.2025.1421

PDF: Full Paper

Board of Governors of the Federal Reserve System published this content on September 19, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on September 19, 2025 at 19:17 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]