Consolidation of air carriers has caused a steady retreat of hubs from mid-sized metropolitan areas like those of the Fourth District. Of the eleven largest airlines before the 1978 deregulation, the “legacy” carriers, all but three have folded or been absorbed via mergers. Since 1990, 15 metro areas have felt the sting of losing an airline hub. In the Fourth District, Pittsburgh lost its home-grown US Airways hub around 2004, and Cleveland will be losing its United Airlines hub this year. The Cincinnati/Northern Kentucky airport, while still nominally a Delta hub, has seen passenger departures reduced from over 10 million in 2005 to fewer than 3 million in 2013.
Using an Improved Taylor Rule to Predict When Policy Changes Will Occur
A standard Taylor rule, which expresses the federal funds rate as a function of inflation, the unemployment gap, and the past federal funds rate, tracks the federal funds rate well over time. We improve the fit by adding employment growth. Then we evaluate the effectiveness of that rule in a new way—by how accurately it predicts whether the FOMC moves the fed funds rate at its next meeting. It does pretty well, predicting nearly 70 percent of the time correctly.
What’s Up in Inflation? Shelter and OER
The Consumer Price Index (CPI) increased 0.1 percent from December to January according to the Bureau of Labor Statistics (BLS). Cold weather across the country contributed to the increase in the CPI, as the electricity and natural gas components of the index both rose sharply. But more generally, an important factor behind recent inflation readings has been an upward trend in inflation in the shelter component of the CPI.