Sticky prices
Why some prices barely move even when everything else changes.
In plain words
Sticky prices are prices that don't jump around every time market conditions change. Think about your rent: it's set once a year at contract renewal, not updated every time the housing market moves. Or your health insurance premium: it resets in January regardless of what happened to medical costs in October. These "sticky" prices are the core of what makes inflation persistent — once they rise, they stay elevated until the next pricing cycle, even if the shock that caused them to rise (say, an energy spike) has already passed. The Atlanta Fed Sticky-Price CPI tracks about 45% of the CPI basket that exhibits this slow-adjustment behaviour.
Flexible vs sticky: the two inflation worlds
Economists divide consumer prices into two groups. Flexible prices (roughly 55% of the basket): petrol, airfares, fresh food, used cars, hotel rooms. These respond within days or weeks to supply and demand shifts. When oil prices fall, petrol prices follow within days. Sticky prices (roughly 45%): rent, medical services, education, restaurant meals, professional services. These follow wage costs and contract cycles. When wages rise, sticky prices follow — but over months or years, not days. The BIS research on price-setting shows that sticky sectors reset prices on average every 4–6 months; flexible sectors reset within 2 months. This division explains why inflation can appear to be "two-speed" — goods disinflation happening fast, services inflation lagging by 12–24 months.
Why it matters for monetary policy
Sticky prices are what make central banks cautious about declaring victory on inflation. When core services inflation remains elevated at 4–5%, it reflects sticky pricing — not demand still running hot. The challenge for the Fed, ECB, and BoE in 2025–2026 has been distinguishing between "stickiness fading naturally as wage growth slows" and "stickiness entrenched because inflation expectations have become unanchored." The former resolves without further tightening; the latter requires it. The FOMC minutes frequently discuss sticky vs flexible price dynamics. Our components guide shows how to separate these two inflation streams in practice.
Common misreadings
"Goods inflation is done, so inflation is done" — not quite. When goods (flexible prices) disinflate quickly after a supply-chain shock, it can look like inflation is conquered. But if sticky-price services remain elevated — as they did in the US and UK in 2023–2024 — the overall disinflation stalls at a level above target. The Atlanta Fed Sticky-Price CPI broke this distinction clearly: flexible-price CPI fell rapidly from mid-2022, while sticky-price CPI remained above 4% well into 2024. This divergence drove the "last mile" of disinflation debate at the Fed and ECB.
Frequently asked questions
Which prices are sticky and which are flexible?
Flexible prices adjust quickly to supply and demand: petrol, fresh produce, airfares, commodity-linked goods. Sticky prices adjust slowly: rent (contracts), healthcare, insurance premiums, education fees, restaurant meals (printed menus). The Atlanta Fed publishes a monthly "Sticky-Price CPI" that separates these two groups — sticky prices have changed less than once every 4.3 months on average; flexible prices change more frequently. The distinction matters for forecasting: flexible prices tell you about supply shocks; sticky prices tell you about embedded inflation.
Why do sticky prices make monetary policy operate with a lag?
When the central bank raises interest rates, demand falls — but sticky prices don't respond immediately. Firms with long-term price contracts, annual pricing cycles, or high menu costs continue to raise prices at their next scheduled reset, even if demand has softened. This is why economists say monetary policy affects inflation with "long and variable lags" — typically 12–24 months for the full effect on core CPI. The Federal Reserve, ECB, and Bank of England all account for this lag when setting policy.
Where can I access the Atlanta Fed Sticky-Price CPI data?
The Atlanta Fed publishes Sticky-Price CPI and Flexible-Price CPI monthly on their research page, available free with data downloads and FRED integration. The FRED series STICKCPIM159SFRBATL (Sticky CPI) and FLEXCPIM159SFRBATL (Flexible CPI) are the easiest access point. The flexible measure is highly correlated with oil and commodity prices; the sticky measure is a useful benchmark for core inflation persistence.