What's Down with Inflation?

Tim Mahedy and Adam Shapiro

FRBSF Economic Letter, 2017

Abstract: After eight years of economic recovery, inflation remains below the FOMC?s target. Dissecting the underlying price data by spending category reveals that low inflation largely reflects prices that are relatively insensitive to overall economic conditions. Notably, modest increases in health-care prices, which have been held down by mandated cuts to the growth of Medicare payments, have helped moderate overall inflation. Further slow growth in health-care prices is likely to remain a drag on inflation.

Date: 2017
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