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Tracking inflation and its effects is a vital component of the Federal Reserve's monetary policy. The Inflation Project compiles links to data releases, reports, research, and international inflation updates.

Inflation Updates

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September 2, 2010
Revised productivity and cost measures show 1.1 percent rise in unit labor costs in second quarter

According to revised data from the Bureau of Labor Statistics, unit labor costs in the nonfarm business sector increased a modest 1.1 percent (annualized) in the second quarter as a 1.8 percent increase in productivity was partially offset by a 0.7 percent drop in hourly compensation. Over the past four quarters, however, unit labor costs have declined 2.8 percent.

Stock and Watson say high unemployment could push core PCE inflation down 0.6 to 0.8 percent over next four quarters

In their paper presented at the latest Federal Reserve Bank of Kansas City's Jackson Hole Conference, James Stock (Harvard) and Mark Watson (Princeton) made some observations regarding the inflation outlook. Their unemployment recession gap model, both alone and augmented with a median expectations forecast, predicts a decline in the rate of four-quarter core PCE (personal consumption expenditures) inflation of 0.8 percentage points from 2010Q2 to 2011Q2. But, they note, "the median forecast over all recession gap activity variables indicates a somewhat smaller decline, by 0.6 percentage points over this period."

However, like any forecast, this prediction comes with an obvious caution—the confidence interval around this estimate is rather wide. The authors stress that "there is considerable uncertainty surrounding these point estimates of further declines in inflation. The standard error bands … are consistent with declines that are considerably more modest or much more severe."

September 1, 2010
Industrial purchasing managers report slightly elevated price pressures in August

In the Institute for Supply Management's August report from manufacturers, the index for prices registered 61.5 percent in August, up 4 percentage points from July. Thirty-five percent of the institute's respondents reported paying higher prices compared with 12 percent who reported paying lower prices. The rise in the monthly index was relatively modest and remains well under the 77.5 percent May reading.

August 31, 2010
FOMC sees subdued underlying inflation and risk of deflation as quite small, according to August minutes

In its August 10, 2010, meeting minutes, released today, the Federal Open Market Committee noted the following:

Policymakers generally saw the inflation outlook as little changed. They observed that a range of measures continued to indicate subdued underlying inflation and that growth in wages and compensation remained quite moderate. Many said they expected underlying inflation to stay, for some time, below levels they judged most consistent with the dual mandate to promote maximum employment and price stability. Participants viewed the risk of deflation as quite small, but a number judged that the risk of further disinflation had increased somewhat despite the stability of longer-run inflation expectations. One noted that survey measures of longer-run inflation expectations had remained positive in Japan throughout that country's bout of deflation. A few saw the continuation of exceptionally accommodative monetary policy in the United States as posing some upside risk to inflation expectations and actual inflation in the medium run.