Journal Article

Progress toward price stability : a 1997 inflation report


Abstract: The primary goal of Federal Reserve monetary policy is to foster maximum long-term growth in the U.S. economy by achieving price stability over time. Price stability will be achieved, according to some definitions, when inflation ceases to be a factor in the decision-making processes of businesses and individuals. Although the Federal Reserve has made considerable progress toward price stability since the early 1980s, inflation remains above the level most analysts would associate with price stability. Because stable prices are essential to maximum long-term economic growth and living standards, the Federal Reserve seeks to contain and gradually reduce inflation until price stability is attained.> Clark reviews recent inflation developments in the United States in relation to the Federal Reserve's goal of achieving price stability over time. First, he examines the behavior of inflation over the past year and finds that all major measures of inflation declined, to the surprise of most observers. Second, he shows that forecasters expect a healthy economy and an unwinding of some of the factors slowing inflation last year to produce slightly higher inflation in 1998. Third, he evaluates the behavior of long-term inflation expectations over 1997 and concludes that the public has become more optimistic about long-term inflation prospects. Together, these findings suggest the Federal Reserve made some headway in lowering inflation last year but will need to remain vigilant if it is to achieve price stability over time.

Keywords: Inflation (Finance); Prices;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 1998

Volume: 83

Issue: Q I

Pages: 5-21