Cooperation, Conflict, and the Emergence of a Modern Federal Reserve
The Federal Reserve System is a model of an independent central bank, with the authority to resist political pressure and act in the long-term best economic interest of the country. But this has not always been the case. In the past—and not too distant past at that—US monetary policy has frequently yielded to other governmental requirements. Even for the modern Federal Reserve, independence is a nuanced, mutable and, ultimately, fragile concept, but one that is essential to maintain.
PCE and CPI Inflation: What’s the Difference?
Two oft-cited measures of inflation are the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) price index. Since 2000, the inflation rate as measured by the CPI has been about half a percentage point higher than PCE inflation. The differences in the two inflation rates can be explained largely by differences in the basket of goods and services that is used to calculate each index and the weights assigned to different prices in each basket.
Updated Policy Projections and Improvement in the Unemployment Rate
In March, the Federal Open Market Committee (FOMC) released its updated Summary of Economic Projections. According to our researchers, changes from December to March in where FOMC participants see the federal funds rate at the end of the next few years suggest that participants generally see a tighter policy environment over the next few years than they saw in December of 2013. The fact that the FOMC’s outlook for the unemployment rate generally improved from December to March and the outlook for inflation generally remained the same explains why there might have been some shifting in the expected path of the federal funds rate.