‘Bottom-up’ approach can improve inflation forecasts – BoE paper

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Using detailed data from the “bottom up” can lead to a substantial improvement in inflation forecasts, research published by the Bank of England finds.

Andreas Joseph, Eleni Kalamara, George Kapetanios and Galina Potjagailo note central banks are increasingly using more granular data and greater computing power to produce their forecasts. In their paper, they use 581 item data series from the consumer prices index (CPI) and 43 macroeconomic series to generate inflation forecasts.

They

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