Search Results
Journal Article
Trend Inflation and Implications for the Phillips Curve
This Economic Commentary estimates trend PCE inflation and a Phillips curve with time-varying parameters while allowing for trend inflation to affect the frequency at which firms change prices. Since the beginning of 2021, trend PCE inflation has risen well above the FOMC’s 2 percent long-term inflation target, and the most recent estimate of trend inflation in 2022:Q4 is 3.4 percent. With the increase in trend inflation, the Phillips curve slope has risen above its prepandemic level. At the same time, the relationship between current inflation and inflation expectations has strengthened. ...
Journal Article
How Much Do Supply and Demand Drive Inflation?
Inflation has remained at levels well above the Federal Reserve’s inflation goal of 2% for over a year. Separating the underlying data from the personal consumption expenditures price index into supply- versus demand-driven categories reveals that supply factors explain about half of the run-up in current inflation levels. Demand factors are responsible for about one-third, with the remainder resulting from ambiguous factors. While supply disruptions are widely expected to ease this year, this outcome is highly uncertain.
Speech
Perspectives on the U.S. Economic Outlook
My view is that the economy is currently in a good place. Labor markets are strong, inflation is moving to target, and growth is likely to be somewhat above potential. Particularly given the recent cuts in the federal funds rate, and the fact that monetary actions take effect with some lag, I would say that this is a good time to patiently assess the economy. In the short run, I do not see a need for additional policy easing unless there is a material change to the forecast.