US inflation’s last mile ‘could take several years’ – Cleveland Fed

Favourable shocks are necessary to reach 2% quickly, researcher argues

Winding road

Travelling the “last mile” of deflation in the US could take several years, says research from the Federal Reserve Bank of Cleveland.

“Theory gives mixed signals about whether inflation persistence is currently high or low,” argues Randal Verbrugge, a senior researcher at the Cleveland Fed. He differentiates between intrinsic and extrinsic forces that influence the persistence of inflation. 

Extrinsic persistence is driven by production costs and labour market dynamics, the author explains.

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