1. Data for your Classroom from
Ed Dolan’s Econ Blog
US Inflation Continues to
Run Below Target
February 21, 2014
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2. CPI Inflation Continues to Run Below Target
The US consumer price index rose
at a seasonally adjusted annual rate
of 1.75 percent in January, 2014
Over the past two years, inflation
has trended downward
The January rate was well below the
Fed’s 2 percent inflation target
Posted February 21, 2014 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
3. The Role of Seasonal Adjustment
Monthly data is often seasonally
adjusted to remove the effects of price
changes that happen at predictable
times of year, such as higher gasoline
prices in the summer driving season
From time to time, the BLS updates its
seasonal adjustment factors
Newly revised adjustment factors
show less month-to-month volatility in
the seasonally adjusted CPI, compare
with previously released data
Posted February 21, 2014 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
4. Year-on-year inflation is also trending down
Another way to eliminate seasonal
factors is to look at year-on-year
changes in the CPI
This chart shows both the all-items
CPI and also the core CPI, which
removes volatile food and energy
prices
Both inflation rates have trended
down over the past two years
Posted February 21, 2014 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
5. Expected Inflation
The Cleveland Fed uses the prices of
Treasury Inflation-Protected Securities
to estimate the rates of inflation
expected by participants in financial
markets
In mid-2013, expected inflation rates
began to rise
Since late summer, expected inflation
has leveled out, and remains well
below the Fed’s 2 percent target
Posted February 21, 2014 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
6. The Bottom Line
The bottom line:
Despite the gradually strengthening
recovery, an upside outbreak of inflation
remains among the least significant
risks facing the U.S. economy
Posted February 21, 2014 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com
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