Do disaggregated CPI data improve the accuracy of inflation forecasts?

► We evaluate the role of using CPI disaggregated data to improve inflation forecasts. ► We employ a factor model using the CPI components for Mexico. ► The factor model outperforms the benchmark model at all forecast horizons. ► Using disaggregated price data improves forecasting performance. ► The best model performs as well as the forecasts from the survey of experts.