Accessible Version

Accessible Version

Figure 1. U.S. Personal Consumption Expenditures Price Index

Series: PCE index and counterfactual PCE index

Horizon: January 1994 to December 2008

Description: The chart shows two curves over January 1994 to December 2008. The units are an index with 2012 equal to 100. The counterfactual PCE index is a straight line starting at just under 70 in January 1994 and increasing steadily to about 94 by December 2008. The PCE index curve follows the counterfactual curve closely except for when it hovers about 1 or 2 points below the counterfactual from the beginning of 1998 to mid-2005 and when it increases to about 3 points above the counterfactual in the first three quarters of 2008.

Note: The counterfactual U.S. Personal Consumption Expenditures Price Index (PCE Index) measures the value if inflation grew at 2 percent annually.

Source: Bloomberg Finance LP; Federal Reserve Board staff calculations.

Figure 2. Estimated Index of Common Inflation Expectations

Percent

Date CIE index 95 percent confidence minimum 95 percent confidence maximum
3/31/1999 2.02 2.02 2.02
6/30/1999 2.06 2.05 2.07
9/30/1999 2.09 2.08 2.11
12/31/1999 2.10 2.08 2.11
3/31/2000 2.07 2.06 2.09
6/30/2000 2.05 2.03 2.07
9/30/2000 2.04 2.03 2.06
12/31/2000 2.05 2.04 2.07
3/31/2001 2.07 2.05 2.09
6/30/2001 2.08 2.06 2.09
9/30/2001 2.07 2.06 2.09
12/31/2001 2.08 2.06 2.09
3/31/2002 2.08 2.07 2.10
6/30/2002 2.10 2.08 2.11
9/30/2002 2.10 2.08 2.12
12/31/2002 2.10 2.08 2.11
3/31/2003 2.09 2.07 2.10
6/30/2003 2.09 2.07 2.11
9/30/2003 2.10 2.09 2.12
12/31/2003 2.13 2.11 2.14
3/31/2004 2.14 2.13 2.16
6/30/2004 2.14 2.13 2.16
9/30/2004 2.14 2.12 2.15
12/31/2004 2.12 2.11 2.14
3/31/2005 2.11 2.10 2.13
6/30/2005 2.11 2.09 2.12
9/30/2005 2.10 2.09 2.12
12/31/2005 2.11 2.09 2.12
3/31/2006 2.11 2.09 2.13
6/30/2006 2.12 2.10 2.13
9/30/2006 2.11 2.10 2.13
12/31/2006 2.10 2.08 2.12
3/31/2007 2.09 2.07 2.10
6/30/2007 2.08 2.06 2.09
9/30/2007 2.09 2.07 2.10
12/31/2007 2.11 2.09 2.12
3/31/2008 2.13 2.11 2.14
6/30/2008 2.13 2.11 2.15
9/30/2008 2.11 2.09 2.12
12/31/2008 2.08 2.06 2.09
3/31/2009 2.07 2.05 2.09
6/30/2009 2.09 2.07 2.11
9/30/2009 2.12 2.10 2.14
12/31/2009 2.13 2.11 2.15
3/31/2010 2.12 2.10 2.13
6/30/2010 2.10 2.08 2.11
9/30/2010 2.09 2.08 2.11
12/31/2010 2.11 2.09 2.12
3/31/2011 2.13 2.11 2.14
6/30/2011 2.13 2.11 2.15
9/30/2011 2.11 2.10 2.13
12/31/2011 2.09 2.08 2.11
3/31/2012 2.09 2.07 2.10
6/30/2012 2.09 2.08 2.11
9/30/2012 2.10 2.08 2.12
12/31/2012 2.10 2.09 2.12
3/31/2013 2.10 2.08 2.11
6/30/2013 2.08 2.07 2.10
9/30/2013 2.08 2.06 2.09
12/31/2013 2.08 2.06 2.09
3/31/2014 2.08 2.06 2.09
6/30/2014 2.06 2.05 2.08
9/30/2014 2.04 2.02 2.05
12/31/2014 2.01 2.00 2.03
3/31/2015 2.00 1.98 2.01
6/30/2015 2.00 1.98 2.01
9/30/2015 1.99 1.97 2.01
12/31/2015 1.97 1.96 1.99
3/31/2016 1.95 1.94 1.97
6/30/2016 1.94 1.93 1.96
9/30/2016 1.95 1.93 1.97
12/31/2016 1.97 1.95 1.99
3/31/2017 1.98 1.97 2.00
6/30/2017 1.98 1.97 2.00
9/30/2017 1.98 1.96 1.99
12/31/2017 1.98 1.96 2.00
3/31/2018 1.99 1.98 2.01
6/30/2018 2.00 1.98 2.02
9/30/2018 2.00 1.98 2.01
12/31/2018 1.98 1.97 2.00
3/31/2019 1.97 1.96 1.99
6/30/2019 1.97 1.95 1.98
9/30/2019 1.96 1.94 1.98
12/31/2019 1.95 1.93 1.97
3/31/2020 1.93 1.92 1.95
6/30/2020 1.93 1.91 1.94
9/30/2020 1.94 1.93 1.96
12/31/2020 1.97 1.96 1.99
3/31/2021 2.01 1.98 2.03

Note : The horizontal dashed line is marked at 2 percent. The common inflation expectations (CIE) index is projected onto the Survey of Professional Forecasters 10-year personal consumption expenditures inflation value. The shaded area   denotes the 95 percent confidence interval.

Source: Ahn and Fulton (2020, 2021); authors' calculations.

Figure 3. Survey of Professional Forecasters Estimates of the Natural Rate

Percent

Date Mean estimate Minimum estimate Maximum estimate
1/1/1996 5.57 5.00 6.00
1/1/1997 5.24 4.50 5.88
1/1/1998 5.23 4.50 5.80
1/1/1999 4.99 4.13 5.60
1/1/2000 4.52 4.00 5.00
1/1/2001 4.59 3.50 5.50
1/1/2002 5.03 3.80 5.50
1/1/2003 5.00 4.31 5.40
1/1/2004 4.81 4.00 5.50
1/1/2005 4.94 4.25 5.50
1/1/2006 4.87 4.00 5.50
1/1/2007 4.71 4.20 5.50
1/1/2008 4.92 4.00 5.50
1/1/2009 5.04 4.00 6.00
1/1/2010 5.64 4.50 6.80
1/1/2011 5.88 4.75 7.00
1/1/2012 5.93 4.75 7.00
1/1/2013 5.90 4.75 7.00
1/1/2014 5.55 4.50 6.70
1/1/2015 5.03 4.25 5.80
1/1/2016 4.84 4.50 5.50
1/1/2017 4.41 3.50 5.00
1/1/2018 4.25 3.80 4.60
1/1/2019 4.18 3.88 4.60
1/1/2020 4.27 3.50 6.00

Source: Survey of Professional Forecasters.

Figure 4. Historical Federal Funds Rate Prescriptions from Simple Policy Rules

Percent

Date Taylor (1993) rule Balanced approach rule Balanced approach rule (shortfalls only)
1/1/2006 4.68 4.85 4.52
4/1/2006 5.22 5.49 4.95
7/1/2006 5.43 5.69 5.16
10/1/2006 5.28 5.73 4.84
1/1/2007 5.52 5.84 5.20
4/1/2007 4.96 5.26 4.66
7/1/2007 4.63 4.77 4.50
10/1/2007 4.76 4.76 4.76
1/1/2008 4.24 4.04 4.04
4/1/2008 4.14 3.69 3.69
7/1/2008 3.57 2.59 2.59
10/1/2008 1.87 0.19 0.19
1/1/2009 -0.23 -3.08 -3.08
4/1/2009 -1.16 -4.88 -4.88
7/1/2009 -1.46 -5.38 -5.38
10/1/2009 -0.72 -4.81 -4.81
1/1/2010 -0.26 -4.13 -4.13
4/1/2010 -0.47 -4.13 -4.13
7/1/2010 -0.77 -4.30 -4.30
10/1/2010 -1.47 -5.13 -5.13
1/1/2011 -0.91 -4.28 -4.28
4/1/2011 -0.40 -3.75 -3.75
7/1/2011 0.28 -2.83 -2.83
10/1/2011 0.80 -1.88 -1.88
1/1/2012 1.26 -1.17 -1.17
4/1/2012 1.00 -1.40 -1.40
7/1/2012 0.87 -1.36 -1.36
10/1/2012 1.17 -0.87 -0.87
1/1/2013 0.72 -1.37 -1.37
4/1/2013 0.73 -1.21 -1.21
7/1/2013 1.18 -0.45 -0.45
10/1/2013 1.47 0.08 0.08
1/1/2014 1.46 0.15 0.15
4/1/2014 2.08 1.21 1.21
7/1/2014 2.14 1.45 1.45
10/1/2014 2.12 1.76 1.76
1/1/2015 1.88 1.51 1.51
4/1/2015 1.76 1.39 1.39
7/1/2015 1.84 1.77 1.77
10/1/2015 1.70 1.65 1.65
1/1/2016 2.12 2.14 2.10
4/1/2016 2.12 2.06 2.06
7/1/2016 2.29 2.22 2.22
10/1/2016 2.55 2.56 2.53
1/1/2017 2.67 2.82 2.52
4/1/2017 2.52 2.79 2.25
7/1/2017 2.38 2.71 2.06
10/1/2017 2.76 3.21 2.32
1/1/2018 3.11 3.60 2.62
4/1/2018 3.52 4.06 2.99
7/1/2018 3.68 4.34 3.02
10/1/2018 3.43 3.98 2.87
1/1/2019 2.77 3.24 2.30
4/1/2019 2.67 3.26 2.08
7/1/2019 2.63 3.18 2.07
10/1/2019 2.22 2.73 1.72
1/1/2020 2.11 2.46 1.77
4/1/2020 -8.37 -17.24 -17.24
7/1/2020 -3.66 -8.21 -8.21
10/1/2020 -1.71 -4.18 -4.18

Notes: The horizontal dashed line is marked at zero. The Taylor (1993) rule was suggested in John B. Taylor (1993), “Discretion versus Policy Rules in Practice,” Carnegie-Rochester Conference Series on Public Policy, vol. 39 (December), pp. 195–214. The balanced-approach rule was analyzed in John B. Taylor (1999), “A Historical Analysis of Monetary Policy Rules,” in John B. Taylor, ed., Monetary Policy Rules (Chicago: University of Chicago Press), pp. 319–41. The rules use historical values of the federal funds rate, core personal consumption expenditure inflation, and the unemployment rate. Quarterly projections of longer-run values for the federal funds rate and the unemployment rate are derived through interpolations of the biannual projections from Blue Chip Economic Indicators. The longer-run value for inflation is taken as 2 percent.

Source: Federal Reserve Bank of Philadelphia; Wolters Kluwer, Blue Chip Economic Indicators; Federal Reserve Board staff estimates.

Last Update: April 14, 2021