US Consumer Price Inflation Rises in April but Inflation Expectations Remain Flat
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US Consumer Price Inflation Rises in April but Inflation Expectations Remain Flat

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The US CPI rose at an annual rate of 3.17 percent in April 2014, the fastest in 10 months, but measures of expected inflation over a 5- and 10-year time horizon remained well below the Fed's 2 percent ...

The US CPI rose at an annual rate of 3.17 percent in April 2014, the fastest in 10 months, but measures of expected inflation over a 5- and 10-year time horizon remained well below the Fed's 2 percent target

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US Consumer Price Inflation Rises in April but Inflation Expectations Remain Flat Presentation Transcript

  • 1. Data for your Classroom from Ed Dolan’s Econ Blog Consumer Price Inflation Rises in April, but Inflation Expectations Remain Flat May 17, 2014 Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
  • 2. Consumer Price Inflation Rises in March  The U.S. consumer price index rose at a seasonally adjusted rate of 3.17 percent in April 2014, the second consecutive monthly increase  Prices for gasoline, cars and medical services helped push the average higher.  In this figure, a fourth-power polynomial trendline is used to smooth month-to-month variation May 17, 2014 Ed Dolan’s Econ Blog
  • 3. Core Inflation Rate Also Rises  Another way to smooth month-to- month variation is to remove volatile food and energy prices from the all- items CPI  The result is called the core CPI  Without the increase in gasoline prices, the core CPI rose a bit less than the all-items CPI in April. Still, it was the second monthly increase in a row. May 17, 2014 Ed Dolan’s Econ Blog
  • 4. Little Change in Expected Inflation  The Cleveland Fed publishes an index of expected inflation based on the prices of Treasury Inflation Protected Securities (TIPS)  In the summer of 2013, inflation expectations moved higher after the Fed announced that it would taper its program of massive asset purchases  Since September 2013, inflation expectations have remained approximately steady. Expectations were essentially unchanged in April May 17, 2014 Ed Dolan’s Econ Blog
  • 5. The Bottom Line  The Federal Reserve has set a target of 2 percent inflation, as measured by the Personal Consumption Deflator, equivalent to about 2.5 percent inflation for the CPI  The latest data on current and expected inflation show that the economy may be edging toward the Fed’s target, but is not there yet May 17, 2014 Ed Dolan’s Econ Blog
  • 6. Click here to learn more about Ed Dolan’s Econ texts or visit www.bvtpublishing.com For more slideshows, follow Ed Dolan’s Econ Blog Follow @DolanEcon on Twitter