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Journal Article
How Quickly Do Prices Respond to Monetary Policy?
With inflation still above the Federal Reserve’s 2% objective, there is renewed interest in understanding how quickly federal funds rate hikes typically affect inflation. Beyond monetary policy’s well-known lagged effect on the economy overall, new analysis highlights that not all prices respond with the same strength or speed. Results suggest that inflation for the most responsive categories of goods and services has come down substantially from recent highs, likely due in part to more restrictive monetary policy. As a result, the contributions of these categories to overall inflation ...
Briefing
How Broad-Based Is the Recent High Inflation?
PCE inflation has been high from March through July. Much commentary has emphasized the contributions of a few extremely large price increases. This Economic Brief provides graphical descriptions of the recent contributions of large price increases to inflation. We then evaluate those recent contributions against their behavior over the last 25 years of low and stable inflation. We find that inflation has been somewhat higher than what one would have predicted based on the past relationship between the contributions of the largest price increases and inflation.
Journal Article
Does Monetary Policy Tightening Reduce Inflation?
Recent research has identified periods when the Federal Reserve intentionally acted to slow inflation when it exceeded desired levels. The success of these disinflation attempts reveals the extent of policymakers’ commitment to lowering inflation. An extension of this analysis indicates that successful disinflations are associated with a decline in the demand-driven component of inflation. This was especially evident during recent monetary policy tightening, with contributions to core inflation from demand declining 2 percentage points since the summer of 2022—the largest decline for any ...