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Newsletter
A Dollar’s Worth: Inflation Is Real
Understanding the reality of inflation can help consumers make decisions in personal finance. Learn more about inflation, how it’s measured, and how the inflation rate is calculated in the December 2021 issue of Page One Economics: Focus on Finance.
Journal Article
Overshooting the Inflation Target
Although transitory factors have largely driven the recent rise in inflation, expansionary policy to relieve unusual economic conditions also played a role.
Report
Transitory or Persistent? What the Frequency of Price Changes May Tell Us about Inflation
This brief shows how distinguishing between the dynamics of frequently and infrequently adjusted prices can provide insight into the nature of inflation—whether inflation pressures are new and transitory or sustained and spreading. It breaks down the non-rent portion of the Consumer Price Index into two subindexes, one for products that change prices frequently (the flexible sector) and one for products that change prices infrequently (the sticky sector).
Journal Article
The CPI–PCEPI Inflation Differential: Causes and Prospects
The Federal Open Market Committee’s inflation target is stated in terms of the personal consumption expenditures price index (PCEPI). The PCEPI, like the consumer price index (CPI), measures inflation in the expenditures of households, but these indexes differ in purpose, scope, and construction. Notably, since the CPI is used as the reference rate for numerous financial contracts, one can derive implied longer-run CPI inflation forecasts from financial contracts. Such forecasts are widely reported. But if policymakers are to use these forecasts to guide their pursuit of the inflation ...
Working Paper
The Price-Change Statistics We’ve Weighted For
The real effects of monetary policy depend on price stickiness. Existing studies that measure aggregate stickiness using US consumer price index microdata hold the consumption basket fixed. This yields a lower level of stickiness in 2024 compared with 1978. We show instead that stickiness is unchanged. Although individual products now change prices more frequently, the effect is largely offset by shifts in consumer spending, notably toward services with stickier prices. These consumption-basket shifts reduce the estimated decline in monetary non neutrality by 25 percentage points, suggesting ...
Discussion Paper
A Closer Look at the Recent Pickup in Inflation
Inflation has picked up in the last few months. Between June and November 2010, the twelve-month change in the seasonally adjusted consumer price index (CPI) was stable, at slightly above 1 percent, but it jumped to 3.1 percent as of last April. Higher food and energy prices have been an important factor behind this pickup in “headline” inflation. However, core inflation has also increased; the year-over-year core CPI (excluding volatile food and energy prices) moved from a record low of 0.6 percent in October 2010 to 1.3 percent in April.
Discussion Paper
Inflation and the Price Expectations of Firms
n the spring of 2021, inflation started to climb above the Federal Open Market Committee's (FOMC) 2 percent target. By June 2022, the inflation rate had increased to territory not seen since the early 1980s – year-over-year growth in the Consumer Price Index (CPI) reached 9.1 percent, while growth in the Personal Consumption Expenditures Price Index (PCEPI), which is followed most closely by the FOMC, hit 7.0 percent. The most recent inflation readings are still extremely elevated—7.7 percent for the CPI (October 2022) and 6.2 percent for the PCEPI (September 2022).
Journal Article
What Do Financial Officers Predict for Price Growth?
Survey responses from chief financial officers and other financial decisionmakers yield a new measure of inflation expectations. Rather than asking about expectations for overall inflation, this survey asks about expected price growth at each respondent’s business. Aggregating survey responses provides an economy-wide indicator that tracks well with actual core consumer price index inflation. Survey responses collected before and during the recent oil shock imply that core inflation could remain elevated this year if the historical relationship between financial officer expectations and ...