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In economics, inflation refers to a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index. As prices do not all increase at the same rate, the consumer price index (CPI) is often used for this purpose. The employment cost index is also used for wages in the United States.
The Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations. This Federal Reserve committee makes key decisions about interest rates and the growth of the United States money supply. Under the terms of the original Federal Reserve Act, each of the Federal Reserve banks was authorized to buy and sell in the open market bonds and short term obligations of the United States Government, bank acceptances, cable transfers, and bills of exchange. Hence, the reserve banks were at times bidding against each other in the open market. In 1922, an informal committee was established to execute purchases and sales. The Banking Act of 1933 formed an official FOMC.
George William Miller was an American businessman and investment banker who served as the 65th United States secretary of the treasury from 1979 to 1981. A member of the Democratic Party, he also served as the 11th chairman of the Federal Reserve from 1978 to 1979. Miller was the first person to hold both of those posts.
The PCE price index (PePP), also referred to as the PCE deflator, PCE price deflator, or the Implicit Price Deflator for Personal Consumption Expenditures by the Bureau of Economic Analysis (BEA) and as the Chain-type Price Index for Personal Consumption Expenditures (CTPIPCE) by the Federal Open Market Committee (FOMC), is a United States-wide indicator of the average increase in prices for all domestic personal consumption. It is benchmarked to a base of 2012 = 100. Using a variety of data including U.S. Consumer Price Index and Producer Price Index prices, it is derived from the largest component of the GDP in the BEA's National Income and Product Accounts, personal consumption expenditures.
The Federal Reserve System has faced various criticisms since it was authorized in 1913. Nobel laureate economist Milton Friedman and his fellow monetarist Anna Schwartz criticized the Fed's response to the Wall Street Crash of 1929 arguing that it greatly exacerbated the Great Depression. More recent prominent critics include former Congressman Ron Paul.
Excess reserves are bank reserves held by a bank in excess of a reserve requirement for it set by a central bank.
The Federal Reserve Bank of St. Louis is one of 12 regional Reserve Banks that, along with the Board of Governors in Washington, D.C., make up the United States' central bank. Missouri is the only state to have two main Federal Reserve Banks. Located in downtown St. Louis, the St. Louis Fed is the headquarters of the Eighth Federal Reserve District, which includes the state of Arkansas and portions of Illinois, Indiana, Kentucky, Mississippi, the eastern half of Missouri and West Tennessee. It has branches in Little Rock, Louisville and Memphis. Its building, at 411 Locust Street, was designed by St. Louis firm Mauran, Russell & Crowell in 1924. The Eighth District serves as a center for local, national and global economic research, and provides the following services: supervisory and regulatory services to state-member banks and bank holding companies; cash and coin-handling for the District and beyond; economic education; and community development resources.
In macroeconomics, inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability, and price stability is achieved by controlling inflation. The central bank uses interest rates as its main short-term monetary instrument.
Core inflation represents the long run trend in the price level. In measuring long run inflation, transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy.
The United States Consumer Price Index (CPI) is a set of consumer price indices calculated by the U.S. Bureau of Labor Statistics (BLS). To be precise, the BLS routinely computes many different CPIs that are used for different purposes. Each is a time series measure of the price of consumer goods and services. The BLS publishes the CPI monthly.
Quantitative easing (QE) is a monetary policy action whereby a central bank purchases government bonds or other financial assets in order to inject monetary reserves into the economy to stimulate economic activity. Quantitative easing is a novel form of monetary policy that came into wide application after the financial crisis of 2007-2008. It is intended to stabilize an economic contraction when inflation is very low or negative and when standard monetary policy instruments have become ineffective. Quantitative tightening (QT) does the opposite, where for monetary policy reasons, a central bank sells off some portion of its own held or previously purchased government bonds or other financial assets, to a mix of commercial banks and other financial institutions, usually after periods of their own, earlier, quantitative easing purchases.
The Great Moderation is a period in the United States of America starting from the mid-1980s until at least 2007 characterized by the reduction in the volatility of business cycle fluctuations in developed nations compared with the decades before. It is believed to be caused by institutional and structural changes, particularly in central bank policies, in the second half of the twentieth century.
This is a list of historical rate actions by the United States Federal Open Market Committee (FOMC). The FOMC controls the supply of credit to banks and the sale of treasury securities. The Federal Open Market Committee meets every two months during the fiscal year. At scheduled meetings, the FOMC meets and makes any changes it sees as necessary, notably to the federal funds rate and the discount rate. The committee may also take actions with a less firm target, such as an increasing liquidity by the sale of a set amount of Treasury bonds, or affecting the price of currencies both foreign and domestic by selling dollar reserves. Jerome Powell is the current chairperson of the Federal Reserve and the FOMC.
James Brian Bullard is the chief executive officer and 12th president of the Federal Reserve Bank of St. Louis, positions he has held since 2008. He is currently serving a term that began on March 1, 2021. In 2014, he was named the 7th most influential economist in the world in terms of media influence.
The 1973–1975 recession or 1970s recession was a period of economic stagnation in much of the Western world during the 1970s, putting an end to the overall post–World War II economic expansion. It differed from many previous recessions by involving stagflation, in which high unemployment and high inflation existed simultaneously.
End the Fed is a 2009 book by Congressman Ron Paul of Texas. The book debuted at number six on the New York Times Best Seller list and advocates the abolition of the United States Federal Reserve System "because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty." The book argues that the booms, bubbles and busts of the business cycle are caused by the Federal Reserve's actions.
Inflation rate in India was 5.5% as of May 2019, as per the Indian Ministry of Statistics and Programme Implementation. This represents a modest reduction from the previous annual figure of 9.6% for June 2011. Inflation rates in India are usually quoted as changes in the Wholesale Price Index (WPI), for all commodities.
The 1994 bond market crisis, or Great Bond Massacre, was a sudden drop in bond market prices across the developed world. It began in Japan and the United States (US), and spread through the rest of the world. After the recession of the early 1990s, historically low interest rates in many industrialized nations preceded an unexpectedly volatile year for bond investors, including those that held on to mortgage debts. Over 1994, a rise in rates, along with the relatively quick spread of bond market volatility across international borders, resulted in a mass sell-off of bonds and debt funds as yields rose beyond expectations. This was especially the case for instruments with comparatively longer maturities attached. Some financial observers argued that the plummet in bond prices was triggered by the Federal Reserve's decision to raise rates by 25 basis points in February, in a move to counter inflation. At about $1.5 trillion in lost market value across the globe, the crash has been described as the worst financial event for bond investors since 1927.
The St. Louis Fed Financial Stress Index (STLFSI) is an index measuring the degree of financial stress in markets published by the Federal Reserve Bank of St. Louis.
A worldwide increase in inflation began in mid-2021, with many countries seeing their highest inflation rates in decades. It has been attributed to various causes, including pandemic-related economic dislocation; the fiscal and monetary stimulus provided in 2020 and 2021 by governments and central banks in response to the pandemic; supply shortages amid increasing consumer demand; the Russian invasion of Ukraine's effect on global oil prices, natural gas, fertilizer, and food prices; and possible price gouging. Higher gasoline prices were a major contributor to inflation as oil producers saw record profits. Debate arose over whether inflationary pressures were transitory or persistent. Central banks responded by aggressively increasing interest rates.
References
- 1 2 James B. Bullard (April 2011). "President's Message: Headline vs. Core Inflation: A Look at Some Issues". The Regional Economist. Federal Reserve Bank of St. Louis.
- ↑ C. P. Chandrasekhar (July 28, 2013). "What defines headline inflation?". The Hindu.
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