Food Prices, Core Inflation, and Inflation Expectations in the United States

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Bayesian structural vector autoregressions show food price shocks raise core inflation and short-term inflation expectations in households.

Food price shocks raised one-year inflation expectations immediately, lasting nine quarters, and significantly impacted core inflation.
Counterfactual analysis suggests one-year expectations would be lower in 2020 and 2022 without food price shocks.
Analysis using Bayesian structural vector autoregressions highlights the relationship between food prices, core inflation, and inflation expectations.
Results suggest that central banks should respond cautiously to food price shocks, avoiding overreaction.

Vatsa et al. (2025) studied this question.

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Bayesian structural vector autoregressions show food price shocks raise core inflation and short-term inflation expectations in households.