October 12, 2017

Why doesn´t the Fed look at its own measures of price pressure?

From most accounts, the Fed is at a loss to understand why inflation is low. Some say their model is broken. Others that changes like globalization have messed their understanding of the inflation process. A few years ago, the St Louis Fed developed an indicator to measure price pressure. According to them: Policymakers usually want to know—to the extent possible—the probability that inflation over the next four or eight quarters will exceed the inflation target. Or, if inflation is very low, they may also want to know the probability that inflation will fall below zero (deflation). Specifically, if Fed policymakers perceive… Read More