The Congressional Budget Office projects consumer price inflation by making projections for individual types of goods and services and then aggregating them into forecasts for economywide consumer price inflation. Each projection accounts for variation across economic sectors in price sensitivity to cyclicality, persistence, and global and supply-side factors. For instance, many services are more sensitive to cyclical fluctuations than many goods, and many goods are more sensitive to supply-side factors than many services. The approach aims to flexibly incorporate shocks to prices of specific goods and services into CBO’s macroeconomic forecast and to produce disaggregated forecasts of prices for use in the agency’s budgetary analyses.
