The Federal Reserve has a mandate to promote stable prices for the U.S. economy as well as maximum employment. Consistent with the price stability part of that mandate, the Federal Open Market Committee (FOMC) has set an inflation target of 2%, as measured by the year-over-year percentage change in the price index for personal consumption expenditures (PCE). Inflation in the U.S. is currently running far above the Fed’s 2% target and is at levels last seen in the 1970s and early 1980s. The FOMC faced inflation levels in 1974 and 1983 that were similar to today’s inflation rate, but its policy responses were very ... (full story)