Proceedings of The 6th International Conference on Management, Economics and Finance
The Analysis of US Price Index and Inflation under Global Crises Based on PCEPI and Core PCEPI Data From 2019
With the high inflation under global crises, namely the pandemic and the Ukraine war, forecasting inflation is crucial to policy and decision-making. In light of the dramatic changes in commodity prices, this paper focuses on the relationship between price indexes and inflation, and provides inflation forecasts based on time series analyses of PCE and core PCE price indexes with ARIMA models. Considering both interpretability and accuracy of the models, two best-performing models are selected for PCEPI and core-PCEPI from several feasible models. It is predicted that the inflation and core inflation rates are likely to decrease in the next six months, as a result of continuously decreasing difference between the forecasted upgoing price indexes and that in the previous year. Yet the inflation is likely to remain at a high level compared to the 2% target, with inflation rate above 3.6% and core inflation around 5%. Based on these predictions, raising interest rates, reducing money supply, and improving social welfare are suggested.
keywords: inflation, forecast, price index, global crises, model building