Why the Fed sees inflation differently than you

Energy Costs Are Up

Gas prices displayed at a USA Gasoline station on July 16, 2013 in Los Angeles, California. Higher gas prices spurred a 0.5 percent rise in the CPI back in 2013. Today's recent CPI growth showed another increase in energy costs by 0.9 percent. 

Thanks to the Labor Department, we got a read Tuesday on the state of the U.S. Economy. The latest Consumer Price Index indicates inflation is up.

Federal Reserve policymakers, who are meeting in Washington Tuesday and Wednesday, will pay close attention to that report, although they view it through a different lens than the rest of us.

The Fed wants to get ahead of inflation, because when the Fed changes its policies, that doesn’t have an immediate effect.  “It’s a long and variable lag process,” says Kevin T. Jacques, a professor of finance at Baldwin Wallace University. “It just takes a lot of time.”

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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