Question: Please read the direction below and write 550 words. You are senior economists at the Federal Reserve Bank of New York and will prepare a

Please read the direction below and write 550 words.

You are senior economists at the Federal Reserve Bank of New York and will prepare a monetary policy recommendation for the November 2 3, 2021 Federal Open Market Committee (FOMC) meeting.

Inflation

Two price indices measuring inflation are personal consumption expenditure (PCE) and consumer price index (CPI).

Focus Questions

Is it important to compare headline and core price indices? What does each one tell

you?

Based on core PCE deflator data, what is the current inflation rate? Do you expect it to

change? Why or why not?

What factors might affect the price level?

Why are the CPI and PCE price indices different? Which one does the Fed focus on when

making monetary policy decisions? What is the Feds target inflation rate?

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