Shepherdson: Fiscal Plan Has 'Unknowable Consequences'

The video discusses the differences between PCE inflation and personal inflation experiences, highlighting the broad nature of PCE metrics, including medical costs and rent equivalents. It explains the role of these metrics in policy-making, particularly in setting inflation targets. The discussion also covers the current accommodative monetary policy, the rise in core and wage inflation, and the potential impact of fiscal stimulus under the Trump administration on the economy, emphasizing the challenges faced by the Federal Reserve in predicting outcomes.

Why might the PCE inflation rate not reflect personal experiences of inflation?

• It excludes housing costs.

• It is calculated based on international markets.

• It only measures food and energy prices.

• It includes a large portion of medical costs and rent equivalents.

What is the current stance of the Fed regarding monetary policy?

• Tightening

• Restrictive

• Ultra accommodative

• Neutral

What is one reason for the rise in core inflation and wage inflation?

• Accommodative monetary policy

• Decrease in consumer spending

• Increase in unemployment

• Reduction in government spending

What unique situation is the economy facing with the new administration?

• Fiscal stimulus in an economy near full employment

• High unemployment with no fiscal stimulus

• Stagnant growth with decreasing inflation

• Deflationary pressures with high interest rates

Why is it difficult for the Fed to predict economic outcomes under the new administration?

• Predictable fiscal policies

• Stable economic conditions

• Lack of historical data

• Unknowable consequences for inflation and growth