Inflation: When Will it Slow?

Just as trees don’t grow to the sky, the rate of inflation will stop rising. The question is when? The chart below shows twelve-month percent changes in the Fed’s preferred measure of consumer price inflation—the Personal Consumption Expenditures (PCE) index. The headline index in blue rose 6.4 percent in February, the largest twelve-month increase in … Continue reading Inflation: When Will it Slow?

How Does the Ukraine War Affect the Outlook?

You have almost certainly discovered that prices at the pump have jumped over recent days. Unfortunately, pump prices are still headed higher. The Russian invasion of Ukraine has disrupted the global oil market and pushed energy prices higher. This impact is coming at a time when inflation is running at the fastest pace in four … Continue reading How Does the Ukraine War Affect the Outlook?

Confronting the Inflation Beast

The recent news on the economy has been disappointing. The CPI rose 7.5 percent over the twelve months ending in January, shown in the chart below. This increase is the briskest since March 1982. Moreover, outsized price increases have become more widespread across various categories of goods and services, an indication that inflation has become … Continue reading Confronting the Inflation Beast

What Will it Take to Tame Inflation?

At the late-January FOMC meeting, the Fed acknowledged that it had fallen behind the curve on inflation and would likely take more aggressive tightening actions than forecast in December to bring inflation back under control. In mid-December, the target for the federal funds rate was 0 to 25 basis points (also the current target), and … Continue reading What Will it Take to Tame Inflation?

Inflation: Is it Really Transitory?

Source: “Transitory.” Dictionary, Merriam-Webster  Concern about inflation has been mounting over recent months and was punctuated by the 0.9 percent increase in the CPI for October (11 percent at an annual rate). Public opinion polls are indicating that concern about the inflation outlook has been steadily rising. Meanwhile, Fed policymakers have been saying that … Continue reading Inflation: Is it Really Transitory?

Placing the Expansion in Perspective

It bears repeating that this business cycle has been like no other. The COVID shock produced the steepest contraction in output but the shortest recession on record. Spending on nearly everything except food purchased from grocery stores dropped precipitously. In the face of the lockdown, production of nearly everything also dropped off sharply. In a … Continue reading Placing the Expansion in Perspective