Summary of What’s Down with Inflation?

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What’s Down with Inflation? summary
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Recommendation

Between the end of the Great Recession in June 2009 and the close of 2017, inflation remained below the Federal Reserve’s 2% goal. Economists Tim Mahedy and Adam Shapiro explore the landscape of a low-inflation environment and the surprising factor behind it. Whether the 0.5% rise in consumer prices in January 2018 signals the start of an inflationary trend or turns out to be a short-term spike is unclear, but getAbstract nonetheless recommends this astute report to analysts, economists and executives interested in what drives inflation.

In this summary, you will learn

  • Why inflation has lagged the Federal Reserve’s 2% threshold during the economic recovery,
  • What factors contribute to this dynamic and
  • What those aspects mean for future inflation trends.
 

About the Authors

Tim Mahedy is an associate economist at the Federal Reserve Bank of San Francisco, where Adam Shapiro is a research adviser.

 

Summary

Since the 2008 financial crisis, the Federal Reserve has pursued a policy benchmark for inflation – measured by “core personal consumption expenditures (PCE) prices” – of 2% annual growth. Despite years of highly accommodative monetary policy and a slow but steady labor market, inflation’s inability to meet the 2% threshold baffled economists. Central bankers turn to core elements of inflation to clarify this conundrum. They isolate “procyclical” forces – price levels associated with current economic conditions – from “acyclical” aspects, those unrelated to underlying economic trends. Modeling...


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