Unemployment rate may be better predictor of inflation than output gap
Forecasting inflation relies on understanding the output gap, which measures how far the economy's actual output is from its potential. Different methods were tested to predict inflation, with multivariate measures of the output gap proving most effective. These methods use data that are not revised in real time. However, alternative indicators like the unemployment rate also show promise in predicting inflation. Uncertainties are highest at the end of calculation periods, so using a combination of output gap and other indicators can provide a more accurate assessment of economic pressures.