Underlying inflation in the spanish economy: estimation and methodology

This paper presents a methodology to analyse the inflationary process in Spain. It is based on forecasts of the Consumer Price Index using quantitative models to obtain a measure of underlying inflation and the expected medium-term value of the annual price growth rate, which is called inertia in the paper. Every time a new observation becomes available, the study of the underlying inflation and inertia allows to be performed a systematic analysis of the inflationary process. The estimation of underlying inflation and inertia has also proven useful to improve the measurement of some important economic indicators such as inflation differentials and ex-ante real interest rates