Figure D

Too-low inflation target predictably leads to under-shooting: Difference between core price level and level that would have prevailed had the Fed’s 2 percent target been met, 2006—2016

Quarter Core PCE, actual Core PCE, at 2% growth
2006Q1 100 100
2006Q2 100.7018 100.4963
2006Q3 101.2705 100.995
2006Q4 101.6557 101.4963
2007Q1 102.2845 102
2007Q2 102.6697 102.5062
2007Q3 103.0828 103.015
2007Q4 103.8275 103.5262
2008Q1 104.48 104.04
2008Q2 104.9886 104.5563
2008Q3 105.6528 105.0752
2008Q4 106.0648 105.5967
2009Q1 106.5949 106.1208
2009Q2 107.2001 106.6475
2009Q3 107.5006 107.1768
2009Q4 107.9223 107.7087
2010Q1 108.1111 108.2432
2010Q2 108.3311 108.7804
2010Q3 108.5586 109.3203
2010Q4 108.711 109.8628
2011Q1 109.0715 110.4081
2011Q2 109.711 110.956
2011Q3 110.2765 111.5067
2011Q4 110.7229 112.0601
2012Q1 111.3024 112.6162
2012Q2 111.7831 113.1751
2012Q3 112.1093 113.7368
2012Q4 112.4215 114.3013
2013Q1 112.8529 114.8686
2013Q2 112.9999 115.4387
2013Q3 113.3583 116.0116
2013Q4 113.706 116.5873
2014Q1 114.0418 117.1659
2014Q2 114.4807 117.7474
2014Q3 114.8305 118.3318
2014Q4 115.0505 118.9191
2015Q1 115.2608 119.5093
2015Q2 115.7179 120.1024
2015Q3 116.0366 120.6984
2015Q4 116.3564 121.2975
2016Q1 116.8661 121.8994
2016Q2 117.3221 122.5044
2016Q3 117.7878 123.1124
2016Q4 118.158 123.7234
2017Q1 118.7289 124.3374
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Notes: Core personal consumption expenditures (CPE) are from Table 2.4 from BEA NIPA. Counterfactual line simply assumes core prices rose at 2 percent annual rate from the first quarter of 2006 onward.

Source: Author's analysis of Bureau of Economic Analysis(BEA) National Income and Product Accounts (NIPA) data series

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