Sticky prices are money prices that adjust slowly when demand, costs or other economic conditions change. Economists call this nominal price rigidity. A sticky price can remain unchanged for a period and then rise or fall.
The word nominal refers to the amount stated in currency, such as US$4 for a cup of coffee. It does not mean the price has been adjusted for inflation. Nor does stickiness mean that a price stays fixed forever.
What causes prices to adjust slowly?
Changing a price can involve work and expense. Economists call these menu costs, after the cost of printing a restaurant’s new menu. They also include replacing shelf labels or updating a price list.
The Federal Reserve Bank of Richmond describes several influences on pricing, including adjustment costs, fixed-price contracts and concern about losing customers. A seller may delay an increase while assessing whether higher input costs will last or whether buyers will switch suppliers.
A contract can hold a price in place for an agreed period. Its actual terms matter: a contract with an adjustment clause may allow a revision following specified events. A long contract does not automatically make every price unchangeable.
A fictional coffee-price example
Suppose two cafes initially charge US$4 for the same type of coffee. Their input costs rise in week 2. For this illustration, assume both eventually choose a US$4.50 price, without any agreement between them.
One seller changes its price in week 2. The other keeps charging US$4 until its next menu revision in week 4. The second price is stickier over this period because it takes longer to adjust.
The illustration compares timing. It does not establish how much a real cafe should charge or imply that every rise in input costs must be passed on to customers.
Some prices move more often than others
The Atlanta Fed’s sticky-price consumer price index separates components of the US CPI according to how frequently their prices change. Gasoline is an example of a frequently changing price; insurance prices typically change less often.
These are differences in adjustment frequency, not permanent rules for every seller. A category’s average also need not describe an individual product or contract. A fixed booking price, for example, is different from the changing prices offered for new bookings.
Even if a coffee’s dollar price stays at US$4, its price relative to other goods can change as their prices move. An unchanged nominal price is therefore different from an unchanged relative price.
Scheduled changes and changes triggered by conditions
Economists model the timing of price adjustment in different ways. In a time-dependent model, opportunities to reset prices follow a schedule or an assumed probability rule. In a state-dependent model, conditions such as a sufficiently large cost change can trigger a price revision.
A Bank of England staff paper published in January 2026 examines these approaches using surveys of UK firms. Its authors find that firms reporting state-dependent pricing respond more strongly to cost shocks, with a larger difference for bigger shocks. That result concerns the firms and evidence studied, rather than a universal rule for every market.
Why sticky prices matter for the economy
When prices do not adjust immediately, changes in spending can affect the quantities businesses sell and produce. In many economic models, this gives monetary-policy changes a route to influence output and employment in the short run.
The mechanism depends on the model. Minneapolis Fed research explains why observing sticky prices alone does not prove a particular policy effect. How firms choose prices, how buyers search and how other markets respond also matter.
Last checked and updated on November 2, 2026 by the MBN editorial team.