Cleveland Fed researchers on inflation expectations; uncertainty and risk around FOMC projections
Inflation expectations remain well anchored even as CPI edges up, say Cleveland Fed researchers
Recently, several measures of inflation have risen modestly. However, a review of various measures of inflation expectations by Federal Reserve Bank of Cleveland researchers Bill Bednar and Mehmet Pasaogullari suggests that the increases do not signal a persistently higher rate of inflation. The researchers say both survey- and market-based measures of inflation expectations have held steady in relatively narrow ranges for some time, indicating that inflation expectations have remained well anchored.
Uncertainty and risk around the FOMC’s forecasts are back to normal, a welcome sign, says Cleveland Fed researcher
Every three months, the Federal Reserve’s Federal Open Market Committee (FOMC) releases its Summary of Economic Projections (SEP), which reports FOMC participants’ forecasts for economic growth, the unemployment rate, and inflation. From June 2011 through at least the end of 2012, most FOMC participants reported uncertainty to be higher than usual around all of their projections, according to Federal Reserve Bank of Cleveland researcher Saeed Zaman. But since then, uncertainty has gradually declined back to normal levels (i.e., similar to historical averages).
In addition, says Zaman, most FOMC participants currently believe that the risks around their projections are broadly balanced, rather than being likely to cause their projections to miss in only one direction, i.e., either above or below the actual outcome.
Normal uncertainty and broadly balanced risks are a welcome sign, says Zaman, because they tend to go hand-in-hand with stable economic conditions.