All measures of consumer price inflation continue to run well below the Fed's 2 percent target as of January, 2014.

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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