The Fed’s Miserable Inflation Targeting Performance In Pictures

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.


  • Since the start of this series in 1960, the Fed hit the range 1.75% to 2.25% only 18.47% of the time, 128 months out of 693 months.
  • For 331 consecutive months, from July of 1966 through December of 1993, core PCE was above 2.25%.
  • The last time the core PCE topped 2.0% was January through April of 2012.
  • In only 4 months out of the last 108 months, from September of 2008 to present, did core PCE exceed 2.0%.
  • 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 price of food drops will people stop eating?
  • If the price of gasoline drops will people stop driving?
  • If price of airline tickets drop will people stop flying?
  • If your coat is worn out, are you inclined to wait another year if you expect a bigger discount a year from now?
  • Will people delay medical procedures in expectation of falling prices?
  • Bonus Question

    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.

    Deflation Benefit

    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.

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    Author: Travis Esquivel

    Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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