On Friday’s broadcast of NPR’s “Morning Edition,” Chicago Federal Reserve Bank President Austan Goolsbee said the inflation reports for May and June were “great,” but he’s frustrated by what he often hears: “You go to the grocery store, it’s expensive. That doesn’t change much.”
Co-host A. Martinez asked, “Austan, we’ve heard from many of our listeners that the positive effects of inflation aren’t necessarily showing up in everyday life, and that necessities like food and rent remain very expensive. Do you feel like this is starting to change at all?”
Goolsby responded, “Yes and no. And it could have made things even worse for us and made us even less popular in that the Fed is not looking at overall inflation, but primarily at core inflation, which doesn’t include energy and food prices. And my mom says, what do you mean, you don’t look at energy and food prices? That’s exactly what I’m thinking. But the reason we look at core inflation is because energy and food prices go up a lot. They can go down a lot. Prices fluctuate a lot.”
He continued, “If you look at core inflation, remember that this is the rate at which prices are increasing. When I talk to people, the complaints they often make are about price levels. They say, ‘I go to the grocery store, it’s expensive. That doesn’t change much. It’s a little frustrating, but that’s not the goal of policy.’ [Fed]The goal of a central bank, which has a dual mandate under the Federal Reserve Act, is to maximize employment and stabilize prices. We interpret that narrowly as getting inflation down to 2 percent. That’s what the central bank is trying to do, as opposed to trying to get prices down to where they were five years ago.”
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