Key takeaways • In a low-inflation regime, inflation is driven largely by sector-specific price changes, with little effect on price- and wage-setting decisions. Core inflation measures tend to provide more accurate signals than headline measures do. The opposite holds in a high-inflation regime, when price changes become more synchronised across sectors and become more salient to workers and firms.

• Several inflation indicators using more detailed information can shed light on the future course of inflation. However, their usefulness depends on the prevailing inflation regime. They become particularly unreliable during transitions between regimes. Indicators based on mean reversion fare especially poorly.

• There are signals that can help to detect an ongoing transition: drifting inflation expectations, an increase in sectoral price co-movements and spillovers, and a rising pass-through from wages to prices and vice versa. Current readings of such indicators send mixed signals on whether a transition to a highinflation regime is under way.