In 2025, headline PCE inflation was roughly unchanged while core inflation edged lower (see the table and chart below). However, core PCE inflation was little changed on a twelve-month basis after the start of the year and both headline and core PCE inflation ended 2025 well above the Fed’s 2 percent target. Consumer prices were … Continue reading Inflation in 2026: Up or Down?
Evolution of Fed Independence and the Current Threat
Since the 1930s, the Fed has been one of the most independent central banks in the world. This was not always the case. However, today the Fed’s independence is being challenged as never before with serious implications for the economy going forward. Starting with the founders, they did not contemplate the United States having a … Continue reading Evolution of Fed Independence and the Current Threat
Is the Fed Holding Back Disinflation?
The Fed is of the view that inflation is receding toward its 2 percent target. The blue line in the chart below shows that core PCE inflation was 2.8 percent over the twelve months ending in September 2025 (latest data). Although this is the same rate of inflation as a year earlier, the Fed argues … Continue reading Is the Fed Holding Back Disinflation?
Will the Fed’s Next Rate Move Be Up or Down?
The Fed announced in late January that it was standing pat on its target for the federal funds rate, following three consecutive rate cuts amounting to 100 basis points. The chart below shows the yield on the two-year Treasury note which can be thought of as expectations of market participants of the average federal funds … Continue reading Will the Fed’s Next Rate Move Be Up or Down?
The Economic Slowdown and Further Disinflation That Has Yet to Happen
In mid-December, the Fed cut its policy interest rate by 25 basis points and conveyed that it likely would be taking a pause from further rate cuts. Nonetheless, Chair Powell and other Fed officials have said that they believe the Fed’s policy remains restrictive, holding down economic growth and inflation. The evidence since that time … Continue reading The Economic Slowdown and Further Disinflation That Has Yet to Happen
Has the Labor Market Returned to Balance?
Financial market participants and observers greeted the jobs report for June with enthusiasm. The 206 thousand increase in employment, shown in the chart below, was coupled with a 54 thousand downward revision to employment gains in May. Many analysts saw this as a gradual slowing in hiring. Moreover, the unemployment rate climbed higher in June to 4.1 … Continue reading Has the Labor Market Returned to Balance?
Thomas D. Simpson, PH.D. 