No matter what the Federal Reserve’s Federal Open Market Committee does with its benchmark interest rate this week, or in the coming months, the challenge facing Fed Chair Janet Yellen is a complex one.
The Fed is charged with keeping inflation in check and promoting full employment, two economic indicators that are not always in synch. In fact, charting the year-over-year changes in the consumer price index and economic activity (used as a stand-in for employment in this case) yields a correlation over the last 35 years of -0.045. That means the two indicators move almost completely independently of one another, which also means that trying to influence both at the same time cannot be a simple task. (The economic-activity figure is for Massachusetts, while the CPI data is for the Boston metro area; there is no comparable data for Rhode Island.)
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
Keep this odd dichotomy in mind when you hear arguments about high inflation being a retardant to economic growth, or low inflation being a necessary ingredient for growth. It’s really much less clear than that. •
