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The Evolution of Disagreement About Long-Run Inflation, 2007–24

Abstract: In this article, we examine disagreement about long-run U.S. inflation in two closely watched surveys over the period 2007–24.1 This was a tumultuous period. The economy was hit by two very large shocks: the Global Financial Crisis (GFC) in 2007–08 and the Covid-19 pandemic in 2020–21. Unemployment soared from 5% to 10% over the 2008–09 period and took six years to reach pre-crisis levels. In March 2020, unemployment surged to 10% from historically low levels, but it returned to pre-pandemic levels in the second half of 2021. Inflation ran below 2% from early 2008 until early 2021, but it soared to historically high levels in 2021–23. Over the period 2007–24 there were developments in the Federal Reserve's communications about its long-run inflation objective and unprecedented policy actions. How did disagreement about long-run inflation evolve within this context?

Keywords: Macroeconomics; monetary economics;

JEL Classification: E31; E52;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Chicago Fed Letter

Publication Date: 2024-10

Volume: 502