Inflation Regime
What is driving current inflation — demand, supply, or expectations?
The Inflation Regime lens identifies the structural drivers of current inflation dynamics. The policy response to inflation depends critically on its source: demand-pull inflation calls for rate hikes, supply-driven inflation may resolve on its own, and expectations-driven inflation requires aggressive credibility defense. Misidentifying the regime leads to policy errors with cascading downstream effects.
Signals Produced
Inflation Driver
INFLATION_DRIVER
Inflation Persistence
PERSISTENCE
Analysis Stages
Component Decomposition
Which CPI/PCE components are driving the headline? Goods vs services vs shelter?
Supply vs Demand Attribution
Are price increases demand-driven (strong spending) or supply-driven (cost push, shortages)?
Expectations Anchoring
Are consumer/market inflation expectations stable, or drifting away from target?
Regime Identification
What does the pattern suggest: transitory shock, structural shift, or self-reinforcing spiral?
Required Sources
Must Have
Headline, core, components (shelter, services, goods), MoM/YoY
BLS.gov
Fed's preferred measure, core PCE, trimmed mean
BEA.gov
Inflation characterization language, risk balance
federalreserve.gov
Enhances Analysis
Pipeline price pressures, input costs
BLS.gov
1-year and 5-year inflation expectations
University of Michigan
Median and distribution of inflation expectations
newyorkfed.org
External price transmission
BLS.gov
Decomposition into sticky vs flexible components
atlantafed.org
FOMC inflation forecasts, dot plot terminal rate
federalreserve.gov
When This Lens Applies
Always applicable for US Monetary Policy theme. Inflation regime is the primary input to Fed decision-making.
Heightened Priority Triggers
- Core CPI/PCE diverges from Fed target by >1pp
- Consumer inflation expectations shift >50bp in single survey
- New supply shock (commodity spike, tariff, supply chain disruption)