Price measures continue to show progress toward the Fed’s inflation target, say Cleveland Fed researchers

How close is the Federal Reserve to its longer-run inflation target of 2 percent? The answer depends on which inflation measure you look at, say Federal Reserve Bank of Cleveland Vice President Todd Clark and Senior Research Analyst William Bednar.

The researchers say focusing on the widely publicized, simple Consumer Price Index (CPI) could lead us to think the Fed has been right on target over the past few months. However, the Fed’s longer-run inflation goal is based on the PCE (Personal Consumption Expenditures) price index.

An alternative measure of CPI inflation, the chain-weighted CPI, is more comparable to the PCE price index, say the researchers. The chain-weighted CPI, like the PCE, shows some recent progress toward the Fed’s 2 percent inflation target.

Read Evaluating Progress Toward the Fed’s Inflation Target

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Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.455.4479