The Fed’s Slow Realization of the Inflation Problem

Abstract

For the 30 years prior to the peak of the previous business cycle in February 2020, monthly inflation rates based on the consumer price index averaged 2.4% while the personal consumption expenditures price index averaged just 2% - very close to the Federal Reserve’s stated goal of 2% inflation. In recent months, inflation has soared to levels not seen in decades. Here, the authors show inflation rates since 1960 and discuss how the Federal Open Market Committee’s inflation projections since 2019 have continually been revised, as well as the actions taken (or lack of) by the Fed to curb rising inflation.