Consumer Inflation Remains Below Fed Target

The Federal Reserve reportedly wants consumer inflation of about 2 percent per year, as measured by the personal consumption expenditures price index, affectionately known as the PCE. By that standard, Fed policy appears too tight, despite near-zero rates and ongoing QE:

Over the past year, the headline PCE (dashed blue line) has increased only 1.0 percent, and the core PCE (orange line) is up only 1.1 percent. The core PCE strips out often-volatile food and energy prices not, as some wags would have it, because economists don’t drive, eat, or heat their homes, but because the resulting series appears to be a better predictor of future inflation trends (i.e., less noise, more signal).

At the moment, both measures are close together — and far below the Fed’s alleged target.

About Donald Marron 294 Articles

Donald Marron is an economist in the Washington, DC area. He currently speaks, writes, and consults about economic, budget, and financial issues.

From 2002 to early 2009, he served in various senior positions in the White House and Congress including: * Member of the President’s Council of Economic Advisers (CEA) * Acting Director of the Congressional Budget Office (CBO) * Executive Director of Congress’s Joint Economic Committee (JEC)

Before his government service, Donald had a varied career as a professor, consultant, and entrepreneur. In the mid-1990s, he taught economics and finance at the University of Chicago Graduate School of Business. He then spent about a year-and-a-half managing large antitrust cases (e.g., Pepsi vs. Coke) at Charles River Associates in Washington, DC. After that, he took the plunge into the world of new ventures, serving as Chief Financial Officer of a health care software start-up in Austin, TX. After that fascinating experience, he started his career in public service.

Donald received his Ph.D. in Economics from the Massachusetts Institute of Technology and his B.A. in Mathematics a couple miles down the road at Harvard.

Visit: Donald Marron

Be the first to comment

Leave a Reply

Your email address will not be published.


*