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Press Release

Cleveland Fed Researcher Explores the Potential for Market-Based Inflation Measures to Improve Inflation Forecasting

Market-based inflation measures can be useful sources of information about the likely path of future headline inflation, according to a new report from the Cleveland Fed’s Center for Inflation Research.

In “A Forecasting Assessment of Market-Based PCE Inflation,” Cleveland Fed researcher Mark Bognanni compares the pseudo-real time forecasting performance of a suite of models for forecasting headline PCE inflation over the short and medium run. He finds that a simple model using only market-based core PCE inflation showed the best forecasting performance at all horizons.

“When given the most recent observations from which to generate predictions, the market-based core PCE inflation model predicts that headline PCE inflation will average between 1.8 percent and 1.9 percent both in the near term (the next 1 to 6 months) and in the medium term (the next 1 to 3 years),” Bognanni says.

Read more: A Forecasting Assessment of Market-Based PCE Inflation

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell,, 513.455.4479