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Instantaneous (Eeckhout, 2023) PCE and CPI inflation.

Figure 1: Instantaneous PCE deflator inflation (blue), core PCE deflator (tan), per Eeckhout, T=12, a=4 (bold red). Red dashed line at 2% inflation. NBER defined peak-to-trough recession dates shaded gray. Source: BEA via FRED, and author’s calculations.

Figure 2: Instantaneous CPI deflator inflation (blue), core CPI deflator (tan), per Eeckhout, T=12, a=4 (bold red). Red dashed line at 2.46% inflation which is consistent with 2% PCE inflation over the 1986-2023 period.NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED, and author’s calculations.

Note that if we took Jason Furman’s proposal to go to 3% target, we’d already be (at 2.5%) below target. 3%, by the way, is still lower than the 4% that Blanchard considered a decade ago.

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