An analysis of the sources and costs of unpredictable inflation, finding that the uncertainty stems from a lack of appropriate constraints on the monetary policy process, and that the costs could be sharply reduced by adopting a policy that targets a long-run path for the price level.

In their efforts to maintain low inflation, policymakers pay little attention to the growth rate of the money supply. Yet many studies have found that money growth and inflation a closely related, at least in the long run. But how long must money growth remain strong before it begins to concern...

To accurately forecast the future rate of inflation, it is imperative to account for inflation’s underlying trend. This is especially important for medium- to long-run forecasts. In this Commentary I demonstrate a simple but powerful technique for incorporating this trend into standard...

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...

The Median CPI is well-known as an accurate predictor of future infl ation. But it’s just one of many possible trimmed-mean inflation measures. Recent research compares these types of measures to see which tracks future inflation best. Not only does the Median CPI outperform other trims in...

Should the unanticipated slowing of inflation that has occurred since early 2012 raise doubts about the reliability of inflation forecasts? We answer this question by conducting a few exercises with a common macroeconomic forecasting model. Our results indicate that even though inflation turned...

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...