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
Economics: The Inflation Surge
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
Has Stagflation Arrived?
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?
Inflation Storm Clouds
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
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?
What Will it Take to Subdue Inflation?
The latest news on the inflation front has not gotten any better. The Consumer Price Index (CPI) rose 7.9 percent over the twelve months ending in February, the blue line in the chart below, and, even after removing escalating food and energy prices, the CPI rose 6.4 percent, the red line. These measures are up … Continue reading What Will it Take to Subdue Inflation?
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?
Tough Choices for the Fed
The Fed has a dual mandate of maximum employment and stable prices. While the level of employment is three and a half million below the peak at the onset of COVID, chart below, other labor market indicators suggest that maximum employment has been achieved (see December 19, 2021 commentary, Get Ready for Fed Liftoff). The … Continue reading Tough Choices for the Fed
Thomas D. Simpson, PH.D. 