Summary of Former Fed Chair Janet Yellen on why the answer to the inflation puzzle matters

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Former Fed Chair Janet Yellen on why the answer to the inflation puzzle matters summary
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Throughout the longest economic growth cycle in US history, inflation has remained subdued, perplexing economists and policy officials. In a recent speech at the Brookings Institution, former Federal Reserve chair Janet L. Yellen outlines some possible reasons for this change and what impacts it could have on price forecasting and monetary policy prescriptions. Economists, business leaders and analysts interested in deciphering the inflation conundrum will find authoritative insights in this informative report.

About the Author

Janet L. Yellen, formerly Federal Reserve Board chair, is now a Distinguished Fellow in Residence at the Brookings Institution.

 

Summary

Federal Reserve officials debate how low unemployment can coexist with muted inflation.

The Federal Reserve has helped steer the US economy through years of economic growth since 2009 – an unprecedented run for the country. During this period, the unemployment rate has fallen from a Great Recession high of 10% to 3.7% in August 2019, a low not seen in half a century. Yet the rate of inflation, according to the Personal Consumption Expenditures (PCE) metric produced by the Federal Reserve, was 1.4% from August 2018 to August 2019, in line with the 2009 rate and stubbornly below the 2% target the Fed established in 2012.

The Philips curve, the long-accepted predictive model...


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