Turning Points in Inflation: A Structural Breaks Approach with Micro Data

By: Alberto Cavallo and Gastón García Zavaleta

Format:Print
| Language:English
| Pages:27

Abstract

We introduce a novel methodology for detecting inflation turning points that combines high-frequency, disaggregated price data with standard structural break techniques to provide policymakers with more precise and timely signals of inflation dynamics. The methodology consists of three key components: measuring inflation as the slope of the log price index rather than using conventional inflation rates, employing structural break techniques to detect shifts in this slope, and leveraging highly disaggregated price indexes to identify trend breaks at a granular level. We apply this approach to study two critical recent episodes: Argentina’s 2024–2025 disinflation and the inflationary impact of U.S. tariff adjustments in 2025. For Argentina, we detect a broad-based disinflationary turning point in mid-2024. For the U.S., we find significant sectoral inflation accelerations in early 2025, notably in food and furnishings, despite stable aggregate inflation measures. These applications demonstrate the utility of our approach for enhancing real-time inflation monitoring and policy decision-making.