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Press Release

Inflation little changed compared with the 90s, say Cleveland Fed researchers

Forecasts based on inflation dynamics today are similar to the late 1990s

Inflation, as measured by the price index for personal consumption expenditures (PCE), has been below 2 percent for most of the expansion following the Great Recession. Its recent declines came in the midst of a low and falling unemployment rate, stable oil prices, and a depreciating dollar. These forces would not ordinarily be expected to put downward pressure on inflation.

Some economists have raised questions about whether inflation dynamics have recently changed, perhaps as a result of ongoing globalization and increased price competition from the internet. But a new study from economists Edward S. Knotek II and Saeed Zaman of the Federal Reserve Bank of Cleveland finds little evidence of such changes.

Looking at inflation through the lens of a flexible statistical model that can capture variation in inflation dynamics over time, the researchers develop two forecasts:

  • One based on the most recent behavior of inflation and the unemployment rate
  • The second assuming inflation dynamics are governed by behaviors seen in the late 1990s, another period in which both the unemployment rate and inflation were notably low, but also one in which globalization and internet commerce may have been putting less downward pressure on inflation.

The researchers find that the point forecasts for inflation and unemployment from these two approaches are generally similar and, if anything, the projection based on recent inflation dynamics calls for a more rapid rise of inflation to 2 percent today than would have been the case in the late 1990s.

But the researchers also document greater uncertainty around the more recent forecast, consistent with an economy that is now subject to larger shocks and a looser relationship between inflation and unemployment than in the past.

Read the full report: Have Inflation Dynamics Changed?

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,, 513.455.4479