Search Results
Journal Article
Is the Last Mile More Arduous?
US inflation surged starting in spring 2021, with Consumer Price Index (CPI) inflation reaching a 40-year high of 9 percent in mid-2022. Together with improving supply-chain conditions, policy tightening by the Fed decreased inflation to within 1 to 2 percentage points of its 2 percent target by late 2023 without a significant increase in unemployment. However, concerns have been raised that the last mile of disinflation to reduce inflation consistently to its 2 percent target will be more arduous than the previous miles. Close examination of such concerns indicates that they do not receive ...
Report
A Faster Convergence of Shelter Prices and Market Rent: Implications for Inflation
The Federal Reserve currently faces a “last-mile” problem in bringing inflation back to its 2 percent target. Following the series of federal funds rate hikes that began in March 2022 and ended in July 2023, core (excluding food and energy) Personal Consumption Expenditure (PCE) inflation dropped from a year-over-year peak of 5.6 percent in February 2022 to 2.9 percent in December 2023. At the end of 2023, hopes were high that falling inflation would allow the Fed to cut interest rates several times in 2024. However, the disinflation process slowed noticeably in early 2024, prompting ...
Speech
The First Steps toward Disinflation
Inflation in the U.S. is comparable to 1970s levels, and U.S. inflation expectations could become unmoored without credible Fed action, St. Louis Fed President Jim Bullard said during a presentation in Barcelona, Spain. He noted that the Fed has reacted by taking important first steps to return inflation to the 2% target and that U.S. market interest rates have increased substantially, partially in response to promised Fed action.
Speech
Comments on “Managing Disinflations” by Stephen G. Cecchetti, Michael E. Feroli, Peter Hooper, Frederic S. Mishkin, and Kermit L. Schoenholtz with Matthew Luzzetti and Justin Weidner
In the time I have, I will comment on three aspects of the paper: the empirical estimation of the Phillips curve, the role of inflation expectations, and the lessons for policymakers operating in an uncertain environment. The views I present will be my own and not necessarily those of the Federal Reserve System or of my colleagues on the Federal Open Market Committee.
Speech
Disinflation ... and Whose Inflation?
Presentation for the Anderton Economic Policy Symposium, Hobart and William Smith Colleges, Geneva, New York delivered by Kartik Athreya, Director of Research and Head of the Research and Statistics Group, Federal Reserve Bank of New York.
Speech
Bullard Discusses Disinflation, Rate Increases and Economic Resilience on CNBC
During an appearance on CNBC, St. Louis Fed President Jim Bullard discussed disinflation, the federal funds rate and the resilience of the U.S. economy. To help curb inflation, Bullard said his target federal funds rate would be 5 3/8%. The target range for the rate currently is 4.5% to 4.75%.“I think we can get disinflation with a strong labor market, but we'll have to be credible in our policy and we'll have to react to the data as it comes up,” Bullard said.Bullard said the U.S. economy might be more resilient than financial markets thought six to eight weeks ago, and he expects ...
Discussion Paper
High Unemployment and Disinflation in the Euro Area Periphery Countries
Economists often model inflation as dependent on inflation expectations and the level of economic slack, with changes in expectations or slack leading to changes in the inflation rate. The global slowdown and the subsequent sovereign debt crisis caused the greatest divergence in unemployment rates among euro area member countries since the monetary union was founded in 1999. The pronounced differences in economic performances of euro area countries since 2008 should have led to significant differences in price behavior. That turned out to be the case, with a strong correlation evident between ...
Journal Article
Historical Disinflation Episodes: Which Falls First, Goods or Services?
What does it take to bring inflation back down to target? Historically, goods inflation slows first, followed by a longer period in which services inflation slows.
Report
Zombie Credit and (Dis-)Inflation: Evidence from Europe
We show that “zombie credit”—cheap credit to impaired firms—has a disinflationary effect. By helping distressed firms to stay afloat, such credit creates excess production capacity, thereby putting downward pressure on product prices. Granular European data on inflation, firms, and banks confirm this mechanism. Industry-country pairs affected by a rise of zombie credit show lower firm entry and exit rates, markups, and product prices, as well as a misallocation of capital and labor, which results in lower productivity, investment, and value added. Without a rise in zombie credit, ...