Cook suggests US may need to change inflation models
Fed governor believes inflation on path to 2% but tight labour market remains upside risk
Federal Reserve Board member Lisa Cook suggested that economists might have to rethink how they model inflation.
Speaking at an academic convention in New Orleans on January 6, Cook said that much of the current inflationary surge was down to supply-side blockages. She suggested several possible ways to adapt inflation models in these circumstances.
Modellers could use forecasting frameworks “with multiple price components”, or nonlinear or threshold effects, she said. They could also
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