Economists have been arguing about the connection between unemployment and infl ation for decades. Critics claim that the connection is unreliable and leads policymakers astray, while others argue that the relationship is useful for forecasting. We examine the more direct connections between...

This Economic Commentary explains a relatively new method of uncovering inflation expectations, real interest rates, and an inflation-risk premium. It provides estimates of expected inflation from one month to 30 years, an estimate of the inflation-risk premium, and a measure of real interest...

An analysis concluding that inflation measures based on median price changes are a better indicator than measures based on mean price changes.

A response by the Federal Reserve Bank of Cleveland president to critics of his continuing advocacy of zero inflation as the overriding objective of monetary policy.

New models of monetary economies, developed in the last 15 years, suggest that traditional measures of the welfare cost of inflation may underestimate the true loss that inflation inflicts on society. According to these models, the cost of 10 percent inflation ranges from 1 to 5 percent of real...

Oil price shocks do not cause inflation, no matter how close the connection seems to be in our practical experience. But they can cause significant price increases throughout the economy. Tracing the way a sharp increase in the price of crude oil affects prices in various industrial sectors of...

The primary objective of most of the world's central banks these days is to keep inflation low, and the range of inflation rates banks find acceptable appears to be around 2.5 to 3.5 percent. While banks may have hit on this range through trial and error, economic theory and empirical...

Some of the items that make up the Consumer Price Index change prices frequently, while others are slow to change. We explore whether these two sets of prices - sticky and flexible - provide insight on different aspects of the inflation process. We find that sticky prices appear to incorporate...

The relative prices of different categories of consumption goods have been trending over time. Assuming they are exogenous with respect to monetary policy, these trends imply that monetary policy cannot stabilize the prices of all consumption categories. If prices are sticky, monetary policy...

We introduce inventories into an otherwise standard New Keynesian model and study the implications for inflation dynamics. Inventory holdings are motivated as a means to generate sales for demand-constrained firms. We derive various representations of the New Keynesian Phillips curve with...