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What’s Down with Inflation?
Report

What’s Down with Inflation?

Tim Mahedy and Adam Shapiro
FRBSF, 2017
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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Eye Opening

Recommendation

Between the end of the Great Recession in June 2009 and the close of 2017, inflation remained below the Federal Reserve’s 2% goal. Economists Tim Mahedy and Adam Shapiro explore the landscape of a low-inflation environment and the surprising factor behind it. Whether the 0.5% rise in consumer prices in January 2018 signals the start of an inflationary trend or turns out to be a short-term spike is unclear, but getAbstract nonetheless recommends this astute report to analysts, economists and executives interested in what drives inflation.

Take-Aways

  • Despite years of highly accommodative monetary policy and a slow but steady labor market, US inflation did not meet the Federal Reserve’s 2% threshold.
  • To explain this trend, central bankers analyze the “procyclical” forces of inflation – price levels associated with current economic conditions – and the “acyclical” aspects, those unrelated to underlying economic trends.
  • Acyclical components such as health care, financial services, apparel and transportation costs account for 58% of the core inflation metric.

About the Authors

Tim Mahedy is an associate economist at the Federal Reserve Bank of San Francisco, where Adam Shapiro is a research adviser.

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