{"id":262559,"date":"2024-10-17T01:02:38","date_gmt":"2024-10-17T01:02:38","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2024\/10\/17\/fed-inflation-credibility-measured-econbrowser\/"},"modified":"2025-06-25T17:10:49","modified_gmt":"2025-06-25T17:10:49","slug":"fed-inflation-credibility-measured-econbrowser","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2024\/10\/17\/fed-inflation-credibility-measured-econbrowser\/","title":{"rendered":"Fed Inflation Credibility Measured | Econbrowser"},"content":{"rendered":"

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Has the Fed lost credibility, as some people have argued (e.g., EJ Antoni)?<\/p>\n

One way to assess credibility is to see whether people\u2019s expectations of inflation at the medium term (say 3 years) comes close to the implicit target. With a PCE y\/y inflation target of 2%, this means a 2.45% CPI target. Using this, and the NY Fed\u2019s survey of consumers (not economists), we get the following picture:<\/p>\n

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Figure 1:<\/strong> Bordo-Siklos (2015)<\/a> credibility measure using 2.45% target (blue), squared deviation of expectation from 2.45% target (green), 75th percentile deviation from 2.45% target (red). NBER defined peak-to-trough recession dates shaded gray. Source: NY Fed<\/a>, NBER, and author\u2019s calculations.<\/em><\/p>\n

My answer: No. At a minimum, Fed credibility with respect to medium term inflation is as high as \u2014 if not greater than \u2014 it was at the end of the Trump administration.<\/p>\n

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