63 posts on "inflation"
March 1, 2022
Drivers of Inflation: The New York Fed DSGE Model’s Perspective
After a sharp decline in the first few months of the COVID-19 pandemic, inflation rebounded in the second half of 2020 and surged through 2021. This post analyzes the drivers of these developments through the lens of the New York Fed DSGE model. Its main finding is that the recent rise in inflation is mostly accounted for by a large cost-push shock that occurred in the second quarter of 2021 and whose inflationary effects persist today. Based on the model’s reading of historical data, this shock is expected to fade gradually over the course of 2022, returning quarterly inflation to close to 2 percent only in mid-2023.
January 28, 2022
The Global Supply Side of Inflationary Pressures
U.S. inflation has surged as the economy recovers from the COVID-19 recession. This phenomenon has not been confined to the U.S. economy, as similar inflationary pressures have emerged in other advanced economies albeit not with the same intensity. In this post, we draw from the current international experiences to provide an assessment of the drivers of U.S. inflation. In particular, we exploit the link among different measures of inflation at the country level and a number of global supply side variables to uncover which common cross-country forces have been driving observed inflation. Our main finding is that global supply factors are very strongly associated with recent producer price index (PPI) inflation across countries, as well as with consumer price index (CPI) goods inflation, both historically and during the recent bout of inflation acceleration.
November 8, 2021
High Import Prices along the Global Supply Chain Feed Through to U.S. Domestic Prices
The prices of U.S. imported goods, excluding fuel, have increased by 6 percent since the onset of the COVID-19 pandemic in February 2020. Around half of this increase is due to the substantial rise in the prices of imported industrial supplies, up nearly 30 percent. In this post, we consider the implications of the increase in import prices on U.S. industry inflation rates. In particular, we highlight how rising prices of imported intermediate inputs, like industrial supplies, can have amplified effects through the U.S. economy by increasing the production cost of goods that rely heavily on these inputs.
October 20, 2021
The International Experience of Central Bank Asset Purchases and Inflation
Recent inflationary pressures in the global economy have rekindled the debate on the link between money growth and price stability. Specifically, does rapid central bank money creation resulting from large-scale purchases of government securities fuel inflationary spending by households and firms? We argue that there are many valid reasons to be skeptical about this textbook narrative. In this post, we look at the international experience with regard to asset purchases, money growth, and inflation dynamics in the pre-COVID era in an attempt to draw lessons from the recent past. Most notably, we find that the view that large-scale purchases of sovereign debt cause unmanageable inflationary pressures is not supported by the experiences of foreign advanced economies. As a matter of fact, despite the extent and duration of the quantitative easing programs in those economies, central banks faced challenges in achieving their inflation objectives.
October 4, 2021
Oil Prices, Global Demand Expectations, and Near‑Term Global Inflation
Oil prices have increased by nearly 60 percent since the summer of 2020, coinciding with an upward trend in global inflation. If higher oil prices are the result of constrained supply, then this could pose some stagflation risks to the growth outlook—a concern reflected in a June Financial Times article, “Why OPEC Matters.” In this post, we utilize the demand and supply decomposition from the New York Fed’s Oil Price Dynamics Report to argue that most of the oil price increase over the past year or so has reflected improving global demand expectations. We then illustrate what these changing global demand expectations might mean for near-term global inflation developments.
March 31, 2021
The New York Fed DSGE Model Forecast—March 2021
This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. The model projects solid growth over the next two years, with core inflation slowly rising toward 2 percent. Uncertainty for both output and inflation forecasts remains large.
September 18, 2020
What’s Up with the Phillips Curve?
U.S. inflation used to rise during economic booms, as businesses charged higher prices to cope with increases in wages and other costs. When the economy cooled and joblessness rose, inflation declined. This pattern changed around 1990. Since then, U.S. inflation has been remarkably stable, even though economic activity and unemployment have continued to fluctuate. For example, during the Great Recession unemployment reached 10 percent, but inflation barely dipped below 1 percent. More recently, even with unemployment as low as 3.5 percent, inflation remained stuck under 2 percent. What explains the emergence of this disconnect between inflation and unemployment? This is the question we address in “What’s Up with the Phillips Curve?,” published recently in Brookings Papers on Economic Activity.
Posted at 7:00 am in DSGE, Inflation, Macroeconomics, Monetary Policy, Unemployment | Permalink | Comments (3)
April 21, 2017
Just Released: The New York Fed Staff Forecast—April 2017
Today, the Federal Reserve Bank of New York (FRBNY) is hosting the spring meeting of its Economic Advisory Panel (EAP). As has become the custom at this meeting, the FRBNY staff is presenting its forecast for U.S. growth, inflation, and the unemployment rate.
Posted at 10:30 am in Forecasting | Permalink
November 14, 2016
Inflation and Japan’s Ever‑Tightening Labor Market
Japan offers a preview of future U.S. demographic trends, having already seen a large increase in the population over 65.
Posted at 7:00 am in International Economics, Labor Market, Macroeconomics, Unemployment | Permalink | Comments (2)
January 5, 2016
Who is Driving the Recent Decline in Consumer Inflation Expectations?
The expectations of U.S. consumers about inflation have declined to record lows over the past several months.
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