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Working Paper

Nowcasting Inflation

This chapter summarizes the mixed-frequency methods commonly used for nowcasting inflation. It discusses the importance of key high-frequency data in producing timely and accurate inflation nowcasts. In the US, consensus surveys of professional forecasters have historically provided an accurate benchmark for inflation nowcasts because they incorporate professional judgment to capture idiosyncratic factors driving inflation. Using real-time data, we show that a relatively parsimonious mixed-frequency model produces superior point and density nowcasting accuracy for headline inflation and competitive nowcasting accuracy for core inflation compared with surveys of professional forecasters over a long sample spanning 1999–2022 and over a short sample focusing on the period since the start of the pandemic.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Knotek, Edward S., II, and Saeed Zaman. 2024. “Nowcasting Inflation.” Federal Reserve Bank of Cleveland, Working Paper No. 24-06.