Board of Governors of the Federal Reserve System

Accessible Version

The Pursuit of Price Stability

Figure 1: Consumer Price Inflation

Note: We date World War I from July 1914 to November 1918, the Great Depression from August 1929 to June 1938, and World War II from September 1939 to September 1945.

Source: Department of Labor, Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items, retrieved from FRED (Federal Reserve Economic Data), a database maintained by the Federal Reserve Bank of St. Louis.

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Figure 2: U.S. Price Level and Gold Reserves in the Pre-Fed Era

Note: The data are monthly.

Source: Gold reserves and price-level data are from the National Bureau of Economic Research, NBER Macrohistory Database. Gold reserves data (NBER series m14076a) are based on various reports from the Department of the Treasury, including Circulation Statement of U.S. Money; Office of the Treasurer, Report of the Treasurer; and Office of the Director, U.S. Mint, Annual Report. Price-level data (NBER series m04051) are based on publications from the Federal Reserve Bank of New York, including letters from the Reports Department.

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Policy Rules and How Policymakers Use Them

Figure 1: Prescriptions of Simple Rules for the Federal Funds Rate

Note: To calculate rule prescriptions, inflation is measured as the four-quarter log difference of the quarterly average of the price index for personal consumption expenditures excluding food and energy. The output gap is measured as the log difference between real gross domestic product (GDP) and potential real GDP. The level of the neutral inflation-adjusted federal funds rate in the longer run, $$ r_t^{LR}$$, is measured as the difference between the linearly interpolated quarterly average values of the long-term forecast for the three-month Treasury bill rate and the long-term forecast for inflation of the implicit GDP price deflator from Blue Chip Economic Indicators. ELB stands for effective lower bound, and FFR stands for federal funds rate. For descriptions of the simple rules, see the text.

Source: The following data series were retrieved from FRED, Federal Reserve Bank of St. Louis: Federal Reserve Board, effective federal funds rate [FEDFUNDS]; Bureau of Economic Analysis, personal consumption expenditures excluding food and energy (chain-type price index) [PCEPILFE], real gross domestic product [GDPC1]; and Congressional Budget Office, real potential gross domestic product [GDPPOT]. In addition, data were drawn from Wolters Kluwer, Blue Chip Economic Indicators.

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