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Figure 1. Inflation Has Been Running Persistently below 2 Percent

Percent

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Period PCE inflation Core PCE inflation
January 2012 2.57 2.09
February 2012 2.52 2.06
March 2012 2.37 2.11
April 2012 2.06 2.03
May 2012 1.66 1.91
June 2012 1.60 1.90
July 2012 1.44 1.84
August 2012 1.55 1.68
September 2012 1.71 1.73
October 2012 1.94 1.84
November 2012 1.68 1.78
December 2012 1.66 1.72
January 2013 1.55 1.67
February 2013 1.71 1.66
March 2013 1.35 1.56
April 2013 1.13 1.44
May 2013 1.24 1.43
June 2013 1.44 1.45
July 2013 1.51 1.44
August 2013 1.31 1.50
September 2013 1.11 1.50
October 2013 0.96 1.43
November 2013 1.23 1.49
December 2013 1.42 1.55
January 2014 1.48 1.47
February 2014 1.17 1.41
March 2014 1.46 1.51
April 2014 1.74 1.63
May 2014 1.84 1.69
June 2014 1.76 1.67
July 2014 1.82 1.74
August 2014 1.65 1.68
September 2014 1.63 1.70
October 2014 1.48 1.62
November 2014 1.26 1.54
December 2014 0.86 1.48
January 2015 0.21 1.36
February 2015 0.30 1.39
March 2015 0.31 1.37
April 2015 0.16 1.33
May 2015 0.25 1.28
June 2015 0.34 1.30
July 2015 0.31 1.25
August 2015 0.33 1.30
September 2015 0.19 1.34
October 2015 0.23 1.28
November 2015 0.40 1.33
December 2015 0.53 1.37
January 2016 1.12 1.61
February 2016 0.91 1.70
March 2016 0.83 1.63
April 2016 1.11 1.71
May 2016 1.04 1.75
June 2016 1.00 1.72
July 2016 0.96 1.78
August 2016 1.14 1.91
September 2016 1.37 1.84
October 2016 1.56 1.91
November 2016 1.52 1.82
December 2016 1.77 1.87
January 2017 2.03 1.89
February 2017 2.18 1.86
March 2017 1.83 1.61
April 2017 1.73 1.57
May 2017 1.52 1.48
June 2017 1.42 1.51
July 2017 1.40 1.41

Median of FOMC participants' PCE inflation projections

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  Percent
2017 1.6
2018 1.9
2019 2.0
2020 2.0

Note: Inflation measured as 12-month percent changes. Core inflation excludes food and energy prices.

Source: Bureau of Labor Statisticsand Federal Reserve Summary of Economic Projections.

Figure 2. Labor Market Conditions Have Strengthened Markedly

Percent

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Period Unemployment rate
January 2012 8.3
February 2012 8.3
March 2012 8.2
April 2012 8.2
May 2012 8.2
June 2012 8.2
July 2012 8.2
August 2012 8.1
September 2012 7.8
October 2012 7.8
November 2012 7.7
December 2012 7.9
January 2013 8.0
February 2013 7.7
March 2013 7.5
April 2013 7.6
May 2013 7.5
June 2013 7.5
July 2013 7.3
August 2013 7.3
September 2013 7.2
October 2013 7.2
November 2013 6.9
December 2013 6.7
January 2014 6.6
February 2014 6.7
March 2014 6.7
April 2014 6.2
May 2014 6.3
June 2014 6.1
July 2014 6.2
August 2014 6.2
September 2014 5.9
October 2014 5.7
November 2014 5.8
December 2014 5.6
January 2015 5.7
February 2015 5.5
March 2015 5.4
April 2015 5.4
May 2015 5.5
June 2015 5.3
July 2015 5.2
August 2015 5.1
September 2015 5.0
October 2015 5.0
November 2015 5.0
December 2015 5.0
January 2016 4.9
February 2016 4.9
March 2016 5.0
April 2016 5.0
May 2016 4.7
June 2016 4.9
July 2016 4.9
August 2016 4.9
September 2016 4.9
October 2016 4.8
November 2016 4.6
December 2016 4.7
January 2017 4.8
February 2017 4.7
March 2017 4.5
April 2017 4.4
May 2017 4.3
June 2017 4.4
July 2017 4.3
August 2017 4.4

Median of FOMC participants' annual and longer-run unemployment projections

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  Percent
2017 4.3
2018 4.1
2019 4.1
2020 4.2
Longer run 4.6

Note: Monthly data. FOMC annual projections are fourth-quarter averages.

Source: Bureau of Labor Statistics and Federal Reserve Summary of Economic Projections.

Figure 3. Why Has PCE Inflation Been Running below 2 Percent?

Percentage points

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Period Total shortfall Contribution of relative food and energy prices Contribution of relative import prices Contribution of slack Contribution of other factors
2000-07 average 0.16 0.39 -0.06 0.00 -0.17
2008-12 average -0.32 0.14 0.04 -0.55 0.04
2013 -0.80 -0.29 -0.34 -0.50 0.33
2014 -0.80 -0.34 -0.23 -0.33 0.10
2015 -1.61 -0.94 -0.59 -0.16 0.09
2016 -0.38 -0.25 -0.42 -0.06 0.35
2017 (estimated) -0.41 0.13 -0.06 0.02 -0.50

Note: Deviation of PCE inflation (4th quarter to 4th quarter) from 2 percent, total and portion attributable to specific factors.

Source: Federal Reserve Board calculations using data from the BEA, BLS, CBO and SPF. See the appendix for further details.

Figure 4. Some of the Recent Inflation Slowdown Reflects Idiosyncratic Factors

Percent

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Period PCE inflation Core PCE inflation Trimmed mean inflation
January 2012 2.57 2.09 2.11
February 2012 2.52 2.06 2.04
March 2012 2.37 2.11 2.05
April 2012 2.06 2.03 2.02
May 2012 1.66 1.91 1.95
June 2012 1.60 1.90 1.90
July 2012 1.44 1.84 1.82
August 2012 1.55 1.68 1.78
September 2012 1.71 1.73 1.78
October 2012 1.94 1.84 1.76
November 2012 1.68 1.78 1.70
December 2012 1.66 1.72 1.62
January 2013 1.55 1.67 1.59
February 2013 1.71 1.66 1.65
March 2013 1.35 1.56 1.58
April 2013 1.13 1.44 1.43
May 2013 1.24 1.43 1.39
June 2013 1.44 1.45 1.46
July 2013 1.51 1.44 1.50
August 2013 1.31 1.50 1.50
September 2013 1.11 1.50 1.50
October 2013 0.96 1.43 1.49
November 2013 1.23 1.49 1.55
December 2013 1.42 1.55 1.60
January 2014 1.48 1.47 1.59
February 2014 1.17 1.41 1.52
March 2014 1.46 1.51 1.57
April 2014 1.74 1.63 1.71
May 2014 1.84 1.69 1.76
June 2014 1.76 1.67 1.74
July 2014 1.82 1.74 1.78
August 2014 1.65 1.68 1.73
September 2014 1.63 1.70 1.72
October 2014 1.48 1.62 1.70
November 2014 1.26 1.54 1.69
December 2014 0.86 1.48 1.65
January 2015 0.21 1.36 1.55
February 2015 0.30 1.39 1.60
March 2015 0.31 1.37 1.60
April 2015 0.16 1.33 1.62
May 2015 0.25 1.28 1.59
June 2015 0.34 1.30 1.63
July 2015 0.31 1.25 1.61
August 2015 0.33 1.30 1.64
September 2015 0.19 1.34 1.66
October 2015 0.23 1.28 1.62
November 2015 0.40 1.33 1.62
December 2015 0.53 1.37 1.62
January 2016 1.12 1.61 1.72
February 2016 0.91 1.70 1.74
March 2016 0.83 1.63 1.72
April 2016 1.11 1.71 1.75
May 2016 1.04 1.75 1.79
June 2016 1.00 1.72 1.74
July 2016 0.96 1.78 1.77
August 2016 1.14 1.91 1.79
September 2016 1.37 1.84 1.79
October 2016 1.56 1.91 1.88
November 2016 1.52 1.82 1.85
December 2016 1.77 1.87 1.91
January 2017 2.03 1.89 1.94
February 2017 2.18 1.86 1.90
March 2017 1.83 1.61 1.82
April 2017 1.73 1.57 1.74
May 2017 1.52 1.48 1.69
June 2017 1.42 1.51 1.68
July 2017 1.40 1.41 1.64

Note: Inflation measured as 12-month percent changes. Core inflation excludes food and energy prices.

Source: Bureau of Labor Statistics and Federal Reserve Bank of Dallas.

Figure 5. The Inflation Outlook Is Inherently Uncertain

Percent

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  Actual PCE inflation Median of FOMC participants' projections (September 2017) Lower bound of 70 percent confidence interval Upper bound of 70 percent confidence interval
2012 1.76      
2013 1.20      
2014 1.20      
2015 0.39      
2016 1.62      
2017   1.6 0.8 2.4
2018   1.9 0.8 3.0
2019   2.0 0.8 3.2
2020   2.0 0.9 3.1

Source: Bureau of Economic Analysis and Federal Reserve Summary of Economic Projections.

Figure 6. Some Labor Indicators Are Not Back to Pre-recession Levels

Percent

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Period Employment-to-population ratio, ages 25 to 54 Part-time employment for economic reasons
January 1990 80.24  
February 1990 80.24  
March 1990 80.11  
April 1990 79.89  
May 1990 79.89  
June 1990 79.76  
July 1990 79.59  
August 1990 79.54  
September 1990 79.41  
October 1990 79.35  
November 1990 79.17  
December 1990 78.96  
January 1991 78.86  
February 1991 78.86  
March 1991 78.68  
April 1991 78.96  
May 1991 78.60  
June 1991 78.68  
July 1991 78.62  
August 1991 78.54  
September 1991 78.61  
October 1991 78.46  
November 1991 78.42  
December 1991 78.28  
January 1992 78.35  
February 1992 78.16  
March 1992 78.22  
April 1992 78.42  
May 1992 78.38  
June 1992 78.47  
July 1992 78.40  
August 1992 78.39  
September 1992 78.28  
October 1992 78.19  
November 1992 78.23  
December 1992 78.15  
January 1993 78.21  
February 1993 78.14  
March 1993 78.24  
April 1993 78.24  
May 1993 78.46  
June 1993 78.59  
July 1993 78.58  
August 1993 78.77  
September 1993 78.64  
October 1993 78.66  
November 1993 78.98  
December 1993 79.02  
January 1994 78.91  
February 1994 78.93  
March 1994 78.91  
April 1994 78.99  
May 1994 79.19  
June 1994 78.82  
July 1994 79.06  
August 1994 79.23  
September 1994 79.60  
October 1994 79.58  
November 1994 79.81  
December 1994 79.80  
January 1995 79.72 3.65
February 1995 79.99 3.52
March 1995 79.90 3.56
April 1995 79.83 3.54
May 1995 79.70 3.63
June 1995 79.53 3.61
July 1995 79.70 3.55
August 1995 79.62 3.61
September 1995 79.79 3.66
October 1995 79.80 3.56
November 1995 79.74 3.59
December 1995 79.70 3.54
January 1996 79.77 3.21
February 1996 79.92 3.52
March 1996 79.91 3.52
April 1996 79.90 3.54
May 1996 79.96 3.43
June 1996 80.13 3.41
July 1996 80.36 3.43
August 1996 80.54 3.45
September 1996 80.44 3.44
October 1996 80.58 3.42
November 1996 80.50 3.15
December 1996 80.50 3.41
January 1997 80.54 3.27
February 1997 80.41 3.31
March 1997 80.60 3.19
April 1997 80.72 3.40
May 1997 80.58 3.11
June 1997 80.87 3.09
July 1997 81.14 3.11
August 1997 81.28 3.11
September 1997 81.12 3.08
October 1997 81.06 3.05
November 1997 81.02 3.03
December 1997 80.99 2.94
January 1998 80.97 3.00
February 1998 81.03 2.96
March 1998 81.05 2.95
April 1998 81.05 2.88
May 1998 80.99 2.84
June 1998 81.02 2.87
July 1998 81.13 2.89
August 1998 81.18 2.69
September 1998 81.26 2.61
October 1998 81.13 2.60
November 1998 81.23 2.52
December 1998 81.32 2.58
January 1999 81.82 2.59
February 1999 81.50 2.58
March 1999 81.33 2.67
April 1999 81.32 2.59
May 1999 81.37 2.55
June 1999 81.37 2.56
July 1999 81.16 2.51
August 1999 81.27 2.46
September 1999 81.32 2.45
October 1999 81.48 2.35
November 1999 81.62 2.40
December 1999 81.47 2.44
January 2000 81.81 2.35
February 2000 81.80 2.32
March 2000 81.75 2.36
April 2000 81.93 2.32
May 2000 81.53 2.40
June 2000 81.52 2.34
July 2000 81.26 2.30
August 2000 81.08 2.35
September 2000 81.13 2.35
October 2000 81.12 2.32
November 2000 81.32 2.52
December 2000 81.37 2.36
January 2001 81.40 2.42
February 2001 81.32 2.40
March 2001 81.27 2.38
April 2001 80.86 2.40
May 2001 80.83 2.51
June 2001 80.59 2.77
July 2001 80.51 2.59
August 2001 80.24 2.48
September 2001 80.20 3.09
October 2001 79.94 3.25
November 2001 79.66 3.17
December 2001 79.77 3.23
January 2002 79.56 3.03
February 2002 79.80 3.14
March 2002 79.61 3.01
April 2002 79.49 3.08
May 2002 79.42 3.01
June 2002 79.20 2.97
July 2002 79.07 3.04
August 2002 79.32 3.15
September 2002 79.36 3.15
October 2002 79.20 3.15
November 2002 78.76 3.17
December 2002 78.97 3.17
January 2003 78.90 3.35
February 2003 78.87 3.52
March 2003 78.96 3.38
April 2003 79.06 3.49
May 2003 78.87 3.32
June 2003 78.93 3.33
July 2003 78.75 3.38
August 2003 78.74 3.21
September 2003 78.61 3.55
October 2003 78.63 3.49
November 2003 78.74 3.51
December 2003 78.78 3.43
January 2004 78.88 3.40
February 2004 78.83 3.28
March 2004 78.74 3.43
April 2004 78.89 3.29
May 2004 79.01 3.30
June 2004 79.10 3.19
July 2004 79.19 3.19
August 2004 79.05 3.21
September 2004 79.02 3.22
October 2004 79.00 3.45
November 2004 79.12 3.24
December 2004 78.93 3.16
January 2005 79.16 3.13
February 2005 79.23 3.03
March 2005 79.17 3.12
April 2005 79.36 3.03
May 2005 79.47 3.05
June 2005 79.21 3.13
July 2005 79.39 3.10
August 2005 79.63 3.15
September 2005 79.44 3.28
October 2005 79.32 2.99
November 2005 79.24 2.96
December 2005 79.34 2.88
January 2006 79.59 2.88
February 2006 79.66 2.91
March 2006 79.79 2.76
April 2006 79.57 2.71
May 2006 79.66 2.85
June 2006 79.75 2.99
July 2006 79.78 2.98
August 2006 79.77 2.90
September 2006 79.86 2.84
October 2006 80.09 2.99
November 2006 80.01 2.88
December 2006 80.11 2.87
January 2007 80.33 2.93
February 2007 80.11 2.89
March 2007 80.25 2.91
April 2007 79.95 2.96
May 2007 80.02 3.07
June 2007 79.91 2.97
July 2007 79.75 3.02
August 2007 79.80 3.14
September 2007 79.75 3.09
October 2007 79.57 2.96
November 2007 79.74 3.07
December 2007 79.72 3.16
January 2008 79.99 3.31
February 2008 79.87 3.35
March 2008 79.77 3.36
April 2008 79.60 3.57
May 2008 79.47 3.62
June 2008 79.37 3.80
July 2008 79.21 4.07
August 2008 78.85 4.03
September 2008 78.77 4.24
October 2008 78.44 4.62
November 2008 78.11 5.07
December 2008 77.56 5.60
January 2009 77.04 5.66
February 2009 76.67 6.21
March 2009 76.24 6.50
April 2009 76.19 6.33
May 2009 75.89 6.50
June 2009 75.87 6.45
July 2009 75.79 6.36
August 2009 75.57 6.47
September 2009 75.10 6.37
October 2009 75.04 6.49
November 2009 75.18 6.57
December 2009 74.75 6.59
January 2010 75.15 6.16
February 2010 75.09 6.45
March 2010 75.11 6.65
April 2010 75.38 6.59
May 2010 75.14 6.35
June 2010 75.23 6.16
July 2010 75.06 6.11
August 2010 75.04 6.31
September 2010 75.05 6.63
October 2010 75.03 6.35
November 2010 74.84 6.38
December 2010 75.03 6.41
January 2011 75.15 6.08
February 2011 75.13 6.07
March 2011 75.29 6.19
April 2011 75.08 6.20
May 2011 75.17 6.14
June 2011 74.98 6.05
July 2011 75.01 5.94
August 2011 75.07 6.28
September 2011 74.94 6.54
October 2011 74.95 6.17
November 2011 75.30 6.00
December 2011 75.44 5.80
January 2012 75.53 5.87
February 2012 75.54 5.81
March 2012 75.73 5.47
April 2012 75.67 5.58
May 2012 75.68 5.70
June 2012 75.65 5.67
July 2012 75.61 5.68
August 2012 75.70 5.60
September 2012 75.96 6.06
October 2012 76.10 5.72
November 2012 75.82 5.70
December 2012 75.96 5.54
January 2013 75.62 5.64
February 2013 75.79 5.67
March 2013 75.84 5.34
April 2013 75.87 5.53
May 2013 75.99 5.47
June 2013 75.89 5.62
July 2013 76.01 5.60
August 2013 75.95 5.41
September 2013 76.00 5.55
October 2013 75.62 5.57
November 2013 76.07 5.35
December 2013 76.18 5.38
January 2014 76.41 5.03
February 2014 76.43 5.00
March 2014 76.58 5.08
April 2014 76.47 5.13
May 2014 76.40 4.92
June 2014 76.76 5.11
July 2014 76.67 5.07
August 2014 76.84 4.90
September 2014 76.84 4.85
October 2014 76.95 4.77
November 2014 76.98 4.66
December 2014 77.11 4.62
January 2015 77.11 4.62
February 2015 77.20 4.50
March 2015 77.17 4.48
April 2015 77.20 4.42
May 2015 77.20 4.40
June 2015 77.24 4.35
July 2015 77.12 4.23
August 2015 77.24 4.32
September 2015 77.27 4.05
October 2015 77.26 3.84
November 2015 77.46 4.09
December 2015 77.48 4.04
January 2016 77.71 4.01
February 2016 77.82 3.99
March 2016 77.98 4.04
April 2016 77.74 3.95
May 2016 77.82 4.24
June 2016 77.79 3.85
July 2016 77.98 3.92
August 2016 77.80 3.97
September 2016 78.00 3.87
October 2016 78.17 3.85
November 2016 78.16 3.72
December 2016 78.19 3.68
January 2017 78.21 3.84
February 2017 78.34 3.74
March 2017 78.49 3.63
April 2017 78.57 3.44
May 2017 78.41 3.41
June 2017 78.51 3.48
July 2017 78.66 3.44
August 2017 78.36 3.42

Note: Part-time employment reported as a share of overall employment. Shaded areas mark recession periods: July 1990-March 1991, March 2001-November 2001, and December 2007-June 2009.

Source: Bureau of Labor Statistics.

Figure 7. Other Indicators Are at or above Pre-recession Levels

Series: Private quits rate, private jobs opening rate, job availability, and jobs hard to fill
Horizon: January 2000 to August 2017
Description: The data are monthly and are plotted as four curves. All four series are reported as indexes, with an average value in 2007 equal to 100. Data for the private quits rate and the private jobs opening rate first become available in January 2001, while data for job availability and jobs hard to fill are shown starting in January 2000.

The quits rate and the jobs opening rate both started out at a relatively high level of around 115 in early 2001 but then fell modestly during the brief recession that ran from March through November of that year. Both series continued to decline over the following year and half, with the quits rate bottoming out at about 90 in mid-2003 and the jobs opening rate bottoming out at about 80. Thereafter, both series gradually recovered and stood at 100 on the eve of the severe recession that began in late 2007. During this recession (which lasted until mid-2009), the quits rate and the jobs opening rate both plummeted, with the former declining to around 65 and the latter to around 55. From then on, both series steadily rose. By August 2017, the quits rate was slightly above 100, its level on the eve of the Great Recession, while the jobs opening rate stood at 125, well above its pre-recession level.

Movements in the index for job availability over time have been quite similar to those of the quits rate and the jobs opening rate. Job availability was stable at a little over 130 from January 2000 through early 2001 but then fell markedly during the 2001 recession and the next two years, with the index bottoming out at about 75 in late 2003. The series then rose steadily through 2007 to 100 but then plunged during the Great Recession to a low of 50. From late 2009 through 2011, job availability remained roughly stable at this low level but thereafter began to climb steadily. By August 2017, the index was close to 110, modestly above its pre-recession level.

Finally, the jobs-hard-to-fill index displays a similar cyclical pattern to the other three indicators of labor market conditions. The index stood at about 130 in January 2000 but then moved up to 140 over the course of the year. The index then fell markedly during the 2001 recession and continued to move down for a time thereafter, falling below 70 for a time in mid-2003. Over the next four years, the jobs-hard-to-fill index gradually recovered to 100 but then plunged from late 2007 through late 2009 to a low of 35. As with the other indicators, the index then began to gradually recover and, by August 2017, stood at about 135, well above its pre-recession level.

Note: All series are 3-month moving averages, rescaled so that 2007 equals 100. Job availability is the portion of households surveyed believing that jobs are plentiful minus the portion believing that they are hard to get, plus 100. Jobs hard to fill equals the percent of small businesses surveyed with at least one hard-to-fill job.

Source: Bureau of Labor Statistics; Conference Board; National Federation of Independent Business.

Figure 8. Measures of Wage Growth Remain Subdued on Balance

Percent

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Period Average hourly earnings Employment cost index Nonfarm business hourly compensation (smoothed) Wage Growth Tracker
2000:Q1   4.63 5.15 4.87
2000:Q2   4.71 5.66 4.93
2000:Q3   4.67 6.63 5.13
2000:Q4   4.49 6.96 5.37
2001:Q1   4.55 6.62 5.33
2001:Q2   4.38 6.31 5.20
2001:Q3   4.46 5.24 5.10
2001:Q4   4.42 4.53 5.00
2002:Q1   3.76 3.61 4.67
2002:Q2   3.85 2.84 4.30
2002:Q3   3.34 2.63 4.00
2002:Q4   3.09 2.22 3.67
2003:Q1   3.63 2.36 3.77
2003:Q2   3.48 2.63 3.57
2003:Q3   4.02 3.00 3.57
2003:Q4   3.99 3.80 3.37
2004:Q1   3.83 4.37 3.37
2004:Q2   3.90 4.66 3.37
2004:Q3   3.76 4.86 3.53
2004:Q4   3.73 4.64 3.67
2005:Q1   3.48 4.74 3.60
2005:Q2   3.13 4.47 3.63
2005:Q3   2.90 3.97 4.03
2005:Q4   2.98 3.63 4.10
2006:Q1   2.65 3.52 3.87
2006:Q2   2.83 3.69 3.83
2006:Q3   3.02 3.66 3.77
2006:Q4   3.09 3.87 3.90
2007:Q1 3.44 3.08 3.80 4.20
2007:Q2 3.42 3.15 3.90 4.07
2007:Q3 3.23 3.02 4.37 4.30
2007:Q4 3.01 3.10 4.40 4.23
2008:Q1 2.93 3.18 3.97 3.93
2008:Q2 2.88 3.05 3.45 4.10
2008:Q3 3.22 2.84 2.97 4.03
2008:Q4 3.47 2.44 2.71 3.93
2009:Q1 3.43 1.96 1.93 3.47
2009:Q2 3.06 1.39 1.74 3.20
2009:Q3 2.52 1.20 1.43 2.60
2009:Q4 2.21 1.19 1.00 1.97
2010:Q1 2.00 1.65 1.87 1.73
2010:Q2 1.82 1.92 1.86 1.73
2010:Q3 1.81 2.00 1.81 1.90
2010:Q4 1.82 1.99 1.81 1.70
2011:Q1 1.86 1.98 2.01 1.90
2011:Q2 2.01 2.33 2.13 1.97
2011:Q3 2.06 2.23 2.32 2.13
2011:Q4 2.04 2.22 2.14 2.07
2012:Q1 1.91 2.12 1.49 1.93
2012:Q2 1.93 1.84 1.50 2.20
2012:Q3 1.85 1.92 1.39 2.10
2012:Q4 1.85 1.82 2.73 2.23
2013:Q1 2.05 1.90 2.76 2.30
2013:Q2 2.09 1.89 2.73 2.17
2013:Q3 2.13 1.88 2.82 2.33
2013:Q4 2.14 2.05 1.34 2.13
2014:Q1 2.13 1.70 2.00 2.40
2014:Q2 2.05 2.03 1.92 2.30
2014:Q3 2.11 2.27 1.96 2.47
2014:Q4 1.97 2.26 2.70 2.87
2015:Q1 2.11 2.75 2.19 3.07
2015:Q2 2.21 1.90 2.62 3.27
2015:Q3 2.26 1.89 2.85 3.07
2015:Q4 2.49 1.88 2.90 3.03
2016:Q1 2.45 1.79 2.76 3.17
2016:Q2 2.59 2.35 2.25 3.50
2016:Q3 2.68 2.18 1.92 3.43
2016:Q4 2.75 2.17 1.12 3.77
2017:Q1 2.68 2.31 1.27 3.27
2017:Q2 2.50 2.30 1.22 3.37
2017:Q3 2.53     3.35

Note: Percent change from a year earlier. Wage Growth Tracker is reported as a 3-month moving average. Nonfarm business hourly compensation reported as the year-over-year percent change in the 4-quarter moving average of the level.

Source: Bureau of Labor Statistics; Federal Reserve Bank of Atlanta.

Figure 9. Have Inflation Expectations Remained Stable?

Series: Expected 10-year PCE inflation (professional forecasters); expected 10-year inflation (households); 5-year, 5-year-forward inflation compensation
Horizon: 2000:Q1 to 2017:Q3
Description: The data are quarterly and are plotted as three curves. Professional forecasters' expectations for 10-year PCE inflation were essentially flat at 2.0 percent from early 2000 through early 2007, fluctuated in a narrow range of 2.0 to 2.2 percent from mid-2007 through late 2012, and have since been essentially flat at 2.0 percent. Households' expectations for inflation over the next 10 years have fluctuated from quarter to quarter but--with the exception of a temporary spike to 3.3 percent in mid-2008--stayed within a narrow range of 2.7 percent to 3.0 percent from 2000 through 2014. Since then, however, household inflation expectations have edged down somewhat and have been running in the range of 2.4 to 2.6 percent since early 2016.

By comparison, inflation compensation has varied markedly since 2000. This series stood at 2.4 percent in early 2000, moved down to almost 2.0 percent during the second half of the year, and then moved back up to 2.4 percent during 2001. From 2002 through 2013, inflation compensation fluctuated noticeably from year to year within a fairly wide range of 2.4 percent to 3.1 percent, showing little trend over time. Since 2013, however, inflation compensation has moved down noticeably, reaching a low of 1.4 percent in 2016:Q3. It has since recovered somewhat and stood at 1.8 percent in 2017:Q3.

Note: The data are quarterly. Forecasters' expectations before 2007 are for the CPI less 0.5 percent.

Source: For households, median response from University of Michigan Surveys of Consumers. For professional forecasts, median response from Survey of Professional Forecasters, FRB Philidelphia. Inflation compensation computed by Federal Reserve Board staff using FRB New York financial market data.

Last Update: September 26, 2017