Core personal consumption expenditures (PCE) is the Fed’s preferred measure of inflation. Core PCE excludes food and energy. Let’s investigate how close the Fed has been to its target since the history of the series, dating to January 1960.
Low inflation has been the Fed’s primary concern for a decade. Their fear is people will stop buying things.
Economic Challenge to Keynesians
Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.
Reality Check Questions
If falling prices stop people from buying things, how are any computers, flat screen TVs, monitors, etc., ever sold, in light of the fact that quality improves and prices decline every year?
My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.
There is no answer because history and logic both show that concerns over consumer price deflation are seriously misplaced.
The BIS did a study and found routine deflation was not any problem at all.
“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study.