When Might the Federal Funds Rate Lift Off? Computing the Probabilities of Crossing Unemployment and Inflation Thresholds
The Federal Open Market Committee has been providing guidance to help markets anticipate when it will begin raising the federal funds rate target. The most recent guidance suggests that the target will not change at least until after an unemployment or inflation threshold is breached. We use a forecasting model to estimate when these thresholds are likely to be breached. We also consider how an inflation floor would affect the timing of liftoff.
Prices from a Monetary Perspective
Economists like to remind people that inflation and deflation are monetary phenomena and that they ultimately stem from central banks’ monetary policies. Inflation results when a nation’s central bank creates more money than its public wants to hold, and deflation occurs when a central bank creates too little. The connection between central banks’ monetary policies and inflation, however, is imprecise and often drawn out over many years. This imprecision happens for two reasons: Not all price changes stem from inflation; some instead reflect an emerging scarcity or abundance of particular goods. And the public’s demand for money, the amount it wants to hold, often is not very stable. Economists can, however, employ a simple technique that helps us see more clearly the relationship between money and price movements.
The Employability of Returning Citizens Is Key to Neighborhood Revitalization
One problem low-income communities may face in trying to revitalize is dealing with a high share of residents who are returning home after serving prison terms. Returning citizens often concentrate in low-income areas, and they typically lack the education and skills needed to find jobs. This Commentary reviews these and other barriers to employment, estimates the degree of unemployment, and describes some solutions emerging for this population.