Category: COVID-19

The more than doubling of IRS staff under the “Inflation Reduction Act” has caused a firestorm over who will be the focus (“targets”) of more tax audits and whether tax audits will be used for political purposes (“weaponization” of the IRS). This controversy raises the question of whether the current U.S. income tax system needs … Continue reading Rethinking the Income Tax

Headline inflation (that is, increases in the prices of all goods and services that consumers buy) has begun to slow. In July, the Consumer Price Index (CPI) showed no change from June in the average price that consumers pay for goods and services. Flatness in headline prices owed to a 4.6 percent decline in energy prices that … Continue reading Will Slower Inflation Lead to a Slowdown in Fed Tightening?

Worries about a looming recession have been ebbing and flowing over recent weeks. Real gross domestic product (GDP) contracted 1-1/2 percent at an annual rate in the first quarter of this year, and estimates for the second quarter suggest another decline. One widely followed estimate comes from the Federal Reserve Bank of Atlanta and utilizes … Continue reading The Coming Recession

On June 15, the Fed stepped up its anti-inflation effort, raising the target for the federal funds by 75 basis points for the first time in nearly three decades. Larger than expected increases in consumer prices and higher expectations of inflation by consumers were given as reasons for the unusual policy action by the Fed. … Continue reading What’s Ahead for the Fed’s Inflation Fight?

If there was any doubt about inflation becoming entrenched, the CPI for May should have dispelled that doubt. Shown below is the twelve-month percent change in the headline CPI and the core CPI which removes food and energy prices. Headline prices rose 8.6 percent and core prices rose 6 percent, the difference reflecting the recent … Continue reading The Economy: More Hard Times Ahead

The Federal Reserve (Fed) in recent statements has been emphasizing the need to bring inflation down. The Fed has said that it will continue to raise its target for the policy interest rate—the overnight federal funds rate—until it restores price stability. The Fed has not explicitly acknowledged that it is behind the curve in achieving … Continue reading A Guide to Forthcoming Fed Actions

Contributed by Dr. Thomas D. Simpson, Executive in Residence at the UNCW Cameron School of Business. Dr. Simpson joined the Department of Economics & Finance after his retirement from the Board of Governors of the Federal Reserve System in Washington, DC. Written for Wilmington Business Journal - Link. According to public opinion polls, after a … Continue reading Economics: The Inflation Surge

Inflation continues to dominate the news and has become firmly lodged as the number one concern faced by the public. The chart below illustrates that headline inflation continued to increase through March to a new forty-year high. Meanwhile, output (GDP after removing the effects of inflation) declined 1-1/2 percent (at an annual rate) in the … Continue reading Has Stagflation Arrived?

The inflation news has gotten worse. As shown by the blue line below, headline inflation rose further in March - to 8.5 percent. This increase was paced by a 32 percent surge in energy prices. Even after removing energy and food prices (so-called core inflation), prices rose 6.5 percent, the red line. Both measures of … Continue reading Inflation Storm Clouds

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?