AIT So Far

Last August, I did a blog post suggesting that in order for the Fed’s new average inflation targeting policy to be successful the PCE price level needed to be roughly 135.207 in January 2030, which represents a 2% annual growth rate over the January 2020 price level (110.917.)

Pixabay

The most recent PCE data is for April 2021, and shows the price level at 114.075. Thus inflation is averaging 2.27% during the first 15 months of the 2020s. The Fed needs PCE inflation to average 1.96% for the remainder of the decade in order to hit their AIT target.

Let’s hope they are serious.