Sharp rises in energy and other commodity prices have recently ignited concerns about inflation. Will these price increases spill over to other prices more generally? We study the typical responses of different price shocks and assess whether the recent behavior of producer and consumer prices...

To accurately forecast the future rate of inflation, it is imperative to account for inflation’s underlying trend. This is especially important for medium- to long-run forecasts. In this Commentary I demonstrate a simple but powerful technique for incorporating this trend into standard...

The Median CPI is well-known as an accurate predictor of future infl ation. But it’s just one of many possible trimmed-mean inflation measures. Recent research compares these types of measures to see which tracks future inflation best. Not only does the Median CPI outperform other trims in...

In the wake of Great Recession, the Federal Reserve engaged in conventional monetary policy actions by reducing the federal funds rate. But soon the rate hit zero, and could go no lower. In such environments, policymakers still think in terms of where the federal funds rate should be, were it...

The Federal Open Market Committee has been providing guidance to help markets anticipate when it will begin raising the federal funds rate target. The most recent guidance suggests that the target will not change at least until after an unemployment or infl ation threshold is breached. We use a...

We take a closer look at the connections between wages, prices, and economic activity. We find that causal relationships between wages and prices are difficult to identify, and the ability of wages to help predict future inflation is limited. Wages appear to be useful in assessing the current...

Since the 1970s, productivity growth in the manufacturing sector has outpaced the overall economy, yet the sector’s share of the workforce has declined dramatically. This leads us to ask if we are in fact engineering ourselves out of jobs. This Economic Commentary explores the relationship...

Models of the macroeconomy have gotten quite sophisticated, thanks to decades of development and advances in computing power. Such models have also become indispensable tools for monetary policymakers, useful both for forecasting and comparing different policy options. Their failure to predict...

The past recession has hit the labor market especially hard, and economists are wondering whether some fundamentals of the market have changed because of that blow. Many are suggesting that the natural rate of long-term unemployment—the level of unemployment an economy can’t go below—has...