Since the mid-1990s, the Federal Open Market Committee (FOMC) has had an implicit or explicit annual inflation target of 2%. In August, the FOMC revised its monetary policy framework to say that the Fed would seek an average inflation target of 2% over the long run, as noted in a recent Economic Synopses essay.

Carlos Garriga, senior vice president and director of research, and Matthew Famiglietti, a research associate, used the revision of the framework as an opportunity to evaluate how successful the Fed has been at achieving its dual mandate (price stability and maximum employment) over the past 25 years.

“So far, the FOMC has done a reasonably good job, in a statistical sense, of keeping unemployment low and prices stable in the era of inflation targeting outside of large recessionary events, including the dot-com bubble, the Great Recession, and the COVID-19 pandemic,” the authors wrote.

The consumer price index (CPI) measures the cost of a fixed bundle of consumer goods relative to the cost of those same goods in a chosen reference year. Inflation is the percent change in the index from one year to the next and reflects how prices are changing for consumers.

The producer price index (PPI) is a similar construct that measures the price that producers get for their wares. It was formerly called the wholesale price index (WPI). Because many of these goods are intermediate goods and thus inputs to the production of final consumer goods, one might hypothesize that changes in the PPI could forecast future changes in the CPI.

The FRED graph above shows recent movements in these two series (January 2015 to present). Both series have grown at a fairly constant rate over the medium term. Moreover, after an initial dip at the start of the COVID recession, the PPI has risen sharply. Does this mean that future CPI inflation is imminent?

While...

In addition to the interactive test prep, our team has put together some of their best resources for AP Macroeconomics students in one place.

Through our Econ Lowdown learning portal, you can access courses, videos and readings that cover various concepts you have learned and will be learning in your class. As you prepare for your exam through online learning, these engaging resources will help you learn, review, apply and practice the concepts.

The consumer price index (CPI) measures the cost of a fixed bundle of consumer goods relative to the cost of those same goods in a chosen reference year. Inflation is the percent change in the index from one year to the next and reflects how prices are changing for consumers.

The producer price index (PPI) is a similar construct that measures the price that producers get for their wares. It was formerly called the wholesale price index (WPI). Because many of these goods are intermediate goods and thus inputs to the production of final consumer goods, one might hypothesize that changes in the PPI could forecast future changes in the CPI.

The FRED graph above shows recent movements in these two series (January 2015 to present). Both series have grown at a fairly constant rate over the medium term. Moreover, after an initial dip at the start of the COVID recession, the PPI has risen sharply. Does this mean that future CPI inflation is imminent?

While...

Housing distress was concentrated among low- and moderate-income (LMI) households of all races and ethnicities. However, disparities existed across the LMI racial and ethnic groups, (See the figure below.)

Statistical analyses of the Socio-Economic Impacts of COVID-19 Survey data show that LMI Black households were 1.4 times more likely than LMI white households to be delinquent on both housing payments (12.9% versus 9.2%) and utility bill payments (18.5% versus 13%) in the early months of the pandemic (from about late January to mid-May 2020). The relationship was somewhat different between white and Hispanic households, as LMI Hispanic households were more than twice as likely as LMI white households to experience eviction or foreclosure (6.5% vs. 3.1%). The risks of missing a housing or utility payment were roughly the same between Hispanic and white households.

Section 342 of the Dodd-Frank Act requires the St. Louis Fed to submit to Congress an annual report on its previous year's OMWI efforts. The St. Louis Fed's report, released March 31, 2021, is the 10th such report since the creation of its OMWI in January 2011. The report details the St. Louis Fed's 2020 OMWI activities related to employment, procurement and financial literacy. Read the 2020 report (PDF).

Past reports:

By Lindsay Jones, Economic Editor

Turning 30 is a big milestone for anyone. It’s not quite as scary as turning 40, or as ponderous as turning 50, but the big 3-0 pretty much means you’re not a kid anymore. You’ve lived a little, you’ve seen a few things—and maybe it’s even time to take stock of where you’ve been.

So it goes for FRED, the signature economic database from the Federal Reserve Bank of St. Louis. Born on April 18, 1991, FRED is 30 years old. That’s right—FRED is a millennial, and all grown up!

FRED debuted with 30 data series—data whose changes over time are plotted on charts or reflected in spreadsheets. The data tool’s reach now spans the globe, with more than 788,000 data series and 6 million-plus users worldwide. ALFRED, which turns 15 in July, offers vintage, or unrevised, data in much the same way.

Many unemployed workers received greater-than-normal unemployment benefits in 2020. The money for those benefits was part of the massive fiscal policy response from the federal government, which Bill Dupor and Fernando Martin explain. Much of that fiscal effort was funneled through state and local governments.

By Ana Hernández Kent, Policy Analyst, and Lowell R. Ricketts, Lead Analyst, Center for Household Financial Stability

If you Google “wealth inequality in America,” you may find our blog post What Wealth Inequality in America Looks Like: Key Facts & Figures. In it, we showed the state of wealth and income inequality in the U.S. using 2016 data—at the time, the most recently available—from the Federal Reserve Board’s Survey of Consumer Finances.

So, how has wealth inequality in the U.S. changed over time? What does the wealth distribution in America look like now? Well, groups that historically have had low wealth had notable increases in median wealth from 2016 to 2019. For Black families, Hispanic families and families with a high school degree (but no more), these impressive gains ranged from 25% to 60%.

Groups that historically have had higher wealth, like white families and families with at least a bachelor’s degree, gained only 4% to 5% more...

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"Shadow Bank Runs" with  Ed Nosal Federal Reserve Bank of St. Louis Working Paper 2020-012B, August 2020

"Reconciling Orthodox and Heterodox Views on Money and Banking" Review of Economic Analysis, 2018-11-24, Vol. 10, No. 4, pp. 351-370Working Paper

"Business Cycles and Labor-Market Search" American Economic Review, March 1996, Vol. 86(1), pp. 112-32

By David Andolfatto, Senior Vice President and Economist

The COVID-19 pandemic has taken a terrible toll on Americans, both in terms of lost lives and disrupted livelihoods. Thankfully, there is hope that the crisis is now waning. As a result, most state and local governments are lifting their restrictions on economic activity, and there are signs of economic recovery.

However, there is still considerable uncertainty over just how rapidly the economy will recover or even whether it will recover at all. With the April unemployment rate hovering near 15%, the outlook is not entirely clear.

When the future is uncertain—as it almost always is—policymakers need to formulate contingency plans. In this post, I describe a contingency plan designed to avoid the possibility of an economic depression occurring due to self-fulfilling prophecy. Even if such an event is not likely, it is wise to be prepared just in case.

Working Paper 2018-026B by

I investigate the theoretical impact of central bank digital currency (CBDC) on a monopolistic banking sector. The framework combines the Diamond (1965) model of government debt with the Klein (1971) and Monti (1972) model of banking. There are two main results. First, the introduction of interest-bearing CBDC increases financial inclusion, diminishing the demand for physical cash. Second, while interest-bearing CBDC reduces monopoly profit, it need not disintermediate banks in any way. CBDC may, in fact, lead to an expansion of bank deposits if CBDCcompetition compels banks to raise their deposit rates.

Read Full Text

https://doi.org/10.20955/wp.2018.026

By Alexander Monge-Naranjo, Research Officer and Economist

Economists often distinguish between idiosyncratic shocks—those that affect a small number of individuals—and aggregate shocks—those that affect a large market or segment of the population. The former can be individually catastrophic, but do not impact the economy overall. The latter, by definition, have direct macroeconomic implications.

In this light, one can hardly find a better example of an aggregate shock than the ongoing COVID-19 crisis. Not only has it affected the health and survival of the entire world, but the consequences for all economies have been large, sustained and ongoing.

In addition to the interactive test prep, our team has put together some of their best resources for AP Macroeconomics students in one place.

Through our Econ Lowdown learning portal, you can access courses, videos and readings that cover various concepts you have learned and will be learning in your class. As you prepare for your exam through online learning, these engaging resources will help you learn, review, apply and practice the concepts.

By Fernando Martin, Research Officer and Economist

The average price level dropped sharply during the early stages of the COVID-19 pandemic and has gradually recovered since then. As a result, annual inflation has remained low: