For release on delivery

10:00 a.m. EDT (8:00 a.m. MDT)

August 27, 2021

Monetary Policy in the Time of Covid

Remarks by

Jerome H. Powell

Chair

Board of Governors of the Federal Reserve System

at

“Macroeconomic Policy in an Uneven Economy,” an economic policy

symposium sponsored by the Federal Reserve Bank of Kansas City

Jackson Hole, Wyoming

(via webcast)

August 27, 2021

 Seventeen months have passed since the U.S. economy faced the full force of the

COVID-19 pandemic. This shock led to an immediate and unprecedented decline as

large parts of the economy were shuttered to contain the spread of the disease.

The path of recovery has been a difficult one, and a good place to begin is by

thanking those on the front line fighting the pandemic: the essential workers who kept

the economy going, those who have cared for others in need, and those in medical

research, business, and government, who came together to discover, produce, and widely

distribute effective vaccines in record time. We should also keep in our thoughts those

who have lost their lives from Covid, as well as their loved ones.

Strong policy support has fueled a vigorous but uneven recovery—one that is, in

many respects, historically anomalous. In a reversal of typical patterns in a downturn,

aggregate personal income rose rather than fell, and households massively shifted their

spending from services to manufactured goods. Booming demand for goods and the

strength and speed of the reopening have led to shortages and bottlenecks, leaving the

COVID-constrained supply side unable to keep up. The result has been elevated inflation

in durable goods—a sector that has experienced an annual inflation rate well below zero

over the past quarter century. 1 Labor market conditions are improving but turbulent, and

the pandemic continues to threaten not only health and life, but also economic activity.

Many other advanced economies are experiencing similarly unusual conditions.

In my comments today, I will focus on the Fed’s efforts to promote our maximum

employment and price stability goals amid this upheaval, and suggest how lessons from

1
See, for example, figure 5.
 -2-

history and a careful focus on incoming data and the evolving risks offer useful guidance

for today’s unique monetary policy challenges.

The Recession and Recovery So Far

The pandemic recession—the briefest yet deepest on record—displaced roughly

30 million workers in the space of two months. 2 The decline in output in the second

quarter of 2020 was twice the full decline during the Great Recession of 2007–09. 3 But

the pace of the recovery has exceeded expectations, with output surpassing its previous

peak after only four quarters, less than half the time required following the Great

Recession. As is typically the case, the recovery in employment has lagged that in

output; nonetheless, employment gains have also come faster than expected. 4

The economic downturn has not fallen equally on all Americans, and those least

able to shoulder the burden have been hardest hit. In particular, despite progress,

joblessness continues to fall disproportionately on lower-wage workers in the service

sector and on African Americans and Hispanics.

The unevenness of the recovery can further be seen through the lens of the

sectoral shift of spending into goods—particularly durable goods such as appliances,

furniture, and cars—and away from services, particularly in-person services in areas such

as travel and leisure (figure 1). As the pandemic struck, restaurant meals fell 45 percent,

air travel 95 percent, and dentist visits 65 percent. Even today, with overall gross

2
This figure includes both the decline in the number reporting themselves as employed in the Household
Survey as well as the BLS’ estimate of those who misreported themselves as employed but not at work
rather than on temporary layoff.
3
From the peak to the trough quarter, gross domestic product dropped 10 percent last year, compared with
3.8 percent in the 2007–09 recession.
4
For example, the consensus forecast reported by Blue Chip Economic Indicators in April 2020 put the
unemployment rate in the second quarter of 2021 at 7.4 percent, compared with the actual value of
5.9 percent.
 -3-

domestic product and consumption spending more than fully recovered, services

spending remains about 7 percent below trend. Total employment is now 6 million

below its February 2020 level, and 5 million of that shortfall is in the still-depressed

service sector. In contrast, spending on durable goods has boomed since the start of the

recovery and is now running about 20 percent above the pre-pandemic level. With

demand outstripping pandemic-afflicted supply, rising durables prices are a principal

factor lifting inflation well above our 2 percent objective.

Given the ongoing upheaval in the economy, some strains and surprises are

inevitable. The job of monetary policy is to promote maximum employment and price

stability as the economy works through this challenging period. I will turn now to a

discussion of progress toward those goals.

The Path Ahead: Maximum Employment

The outlook for the labor market has brightened considerably in recent months.

After faltering last winter, job gains have risen steadily over the course of this year and

now average 832,000 over the past three months, of which almost 800,000 have been in

services (figure 2). The pace of total hiring is faster than at any time in the recorded data

before the pandemic. The levels of job openings and quits are at record highs, and

employers report that they cannot fill jobs fast enough to meet returning demand.

These favorable conditions for job seekers should help the economy cover the

considerable remaining ground to reach maximum employment. The unemployment rate

has declined to 5.4 percent, a post-pandemic low, but is still much too high, and the

reported rate understates the amount of labor market slack. 5 Long-term unemployment

5
An alternative measure that adjusts for the misclassification of some unemployed workers as employed
but not at work (as reported by the Bureau of Labor Statistics) and for diminished labor force participation
 -4-

remains elevated, and the recovery in labor force participation has lagged well behind the

rest of the labor market, as it has in past recoveries.

With vaccinations rising, schools reopening, and enhanced unemployment

benefits ending, some factors that may be holding back job seekers are likely fading. 6

While the Delta variant presents a near-term risk, the prospects are good for continued

progress toward maximum employment.

The Path Ahead: Inflation

The rapid reopening of the economy has brought a sharp run-up in inflation. Over

the 12 months through July, measures of headline and core personal consumption

expenditures inflation have run at 4.2 percent and 3.6 percent, respectively—well above

our 2 percent longer-run objective. 7 Businesses and consumers widely report upward

pressure on prices and wages. Inflation at these levels is, of course, a cause for concern.

But that concern is tempered by a number of factors that suggest that these elevated

readings are likely to prove temporary. This assessment is a critical and ongoing one,

and we are carefully monitoring incoming data.

The dynamics of inflation are complex, and we assess the inflation outlook from a

number of different perspectives, as I will now discuss.

induced by the pandemic (as estimated by Federal Reserve Board staff) currently stands at 7.8 percent, also
a post-pandemic low.
6
Factors holding back job gains are more thoroughly discussed in the July 2021 Monetary Policy Report,
which is available on the Board’s website at
https://www.federalreserve.gov/monetarypolicy/files/20210709_mprfullreport.pdf.
7
These values reflect data through July as released on August 27, 2020. All other statements about
personal consumption expenditures and associated prices reflect data through June and do not include the
August 27, 2021 release covering July.
 -5-

1. The absence so far of broad-based inflation pressures

The spike in inflation is so far largely the product of a relatively narrow group of

goods and services that have been directly affected by the pandemic and the reopening of

the economy. Durable goods alone contributed about 1 percentage point to the latest

12-month measures of headline and core inflation. Energy prices, which rebounded with

the strong recovery, added another 0.8 percentage point to headline inflation, and from

long experience we expect the inflation effects of these increases to be transitory. In

addition, some prices—for example, for hotel rooms and airplane tickets—declined

sharply during the recession and have now moved back up close to pre-pandemic levels.

The 12-month window we use in computing inflation now captures the rebound in prices

but not the initial decline, temporarily elevating reported inflation. These effects, which

are adding a few tenths to measured inflation, should wash out over time.

We consult a range of measures meant to capture whether price increases for

particular items are spilling over into broad-based inflation. These include trimmed mean

measures and measures excluding durables and computed from just before the pandemic.

These measures generally show inflation at or close to our 2 percent longer-run objective

(figure 4). We would be concerned at signs that inflationary pressures were spreading

more broadly through the economy.

2. Moderating inflation in higher-inflation items

We are also directly monitoring the prices of particular goods and services most

affected by the pandemic and the reopening, and are beginning to see a moderation in

some cases as shortages ease. Used car prices, for example, appear to have stabilized;

indeed, some price indicators are beginning to fall. If that continues, as many analysts
 -6-

predict, then used car prices will soon be pulling measured inflation down, as they did for

much of the past decade. 8

This same dynamic of upward inflation pressure dissipating and, in some cases,

reversing seems likely to play out in durables more generally. Over the 25 years

preceding the pandemic, durables prices actually declined, with inflation averaging

negative 1.9 percent per year (figure 5). 9 As supply problems have begun to resolve,

inflation in durable goods other than autos has now slowed and may be starting to fall. It

seems unlikely that durables inflation will continue to contribute importantly over time to

overall inflation. We will be looking for evidence that supports or undercuts that

expectation.

3. Wages

We also assess whether wage increases are consistent with 2 percent inflation

over time. Wage increases are essential to support a rising standard of living and are

generally, of course, a welcome development. But if wage increases were to move

materially and persistently above the levels of productivity gains and inflation, businesses

would likely pass those increases on to customers, a process that could become the sort of

“wage–price spiral” seen at times in the past. 10 Today we see little evidence of wage

increases that might threaten excessive inflation (figure 6). Broad-based measures of

wages that adjust for compositional changes in the labor force, such as the employment

8
Declines in used car prices would begin holding down 12-month inflation once most of the earlier price
increases have fallen out of the 12-month window.
9
The lower inflation in durable goods is probably due to a number factors, including faster productivity
growth in durable goods than in services and globalization.
10
If wages rise in line with inflation and labor productivity growth, then real unit labor costs (or the labor
cost of producing one unit of output) to businesses are constant. Wages may grow slower or faster than
inflation plus productivity growth for extended periods because of changing structural factors without being
reflected in inflation. Ultimately, however, persistently rising real unit labor costs will put upward pressure
on prices.
 -7-

cost index and the Atlanta Wage Growth Tracker, show wages moving up at a pace that

appears consistent with our longer-term inflation objective. We will continue to monitor

this carefully.

4. Longer-term inflation expectations

Policymakers and analysts generally believe that, as long as longer-term inflation

expectations remain anchored, policy can and should look through temporary swings in

inflation. Our monetary policy framework emphasizes that anchoring longer-term

expectations at 2 percent is important for both maximum employment and price stability.

We carefully monitor a wide range of indicators of longer-term inflation

expectations. These measures today are at levels broadly consistent with our 2 percent

objective (figure 4). Because measures of inflation expectations are individually noisy,

we also focus on common patterns across the measures. One approach to summarizing

these patterns is the Board staff’s index of common inflation expectations (CIE), which

combines information from a broad range of survey and market-based measures. 11 This

index captures a general move down in expectations starting around 2014, a time when

inflation was running persistently below 2 percent. More recently, the index shows a

welcome reversal of that decline and is now at levels more consistent with our 2 percent

objective.

Longer-term inflation expectations have moved much less than actual inflation or

near-term expectations, suggesting that households, businesses, and market participants

11
The way the CIE combines the underlying measures means that it will tend not to be affected by
underlying movements that are unique to individual measures; the CIE will reflect movements that are
more common across underlying measures.
 -8-

also believe that current high inflation readings are likely to prove transitory and that, in

any case, the Fed will keep inflation close to our 2 percent objective over time. 12

5. The prevalence of global disinflationary forces over the past quarter century

Finally, it is worth noting that, since the 1990s, inflation in many advanced

economies has run somewhat below 2 percent even in good times (figure 7). The pattern

of low inflation likely reflects sustained disinflationary forces, including technology,

globalization and perhaps demographic factors, as well as a stronger and more successful

commitment by central banks to maintain price stability. 13 In the United States,

unemployment ran below 4 percent for about two years before the pandemic, while

inflation ran at or below 2 percent. Wages did move up across the income spectrum—a

welcome development—but not by enough to lift price inflation consistently to 2 percent.

While the underlying global disinflationary factors are likely to evolve over time, there is

little reason to think that they have suddenly reversed or abated. It seems more likely that

they will continue to weigh on inflation as the pandemic passes into history. 14

We will continue to monitor incoming inflation data against each of these

assessments.

To sum up, the baseline outlook is for continued progress toward maximum

employment, with inflation returning to levels consistent with our goal of inflation

12
On a Q4-over-Q4 basis, the August 13, 2021, Survey of Professional Forecasters reports a consensus
forecast for total personal consumption expenditures inflation of 4.1 percent, 2.2 percent, and 2.3 percent
for 2021 to 2023, respectively. The corresponding numbers for core inflation are 3.7 percent, 2.2 percent,
and 2.1 percent, respectively. The August 10, 2021, Blue Chip Economic Indicators Forecast presents
similar consensus forecasts for 2021 and 2022.
13
For views on this, see Canon, Kudlyak, and Reed (2015), Forbes (2019), Goodhart and Pradhan (2020),
Obstfeld (2020).
14
For an opposing view, see Goodhart and Pradhan (2020), who argue that the globalization and
demographic factors that had been fueling global disinflationary forces are now reversing and could give
rise to an inflationary period. Even if we are near an inflection point, as Goodhart and Pradhan argue,
demographic forces move slowly relative to the near-term policy horizon I am discussing here today.
 -9-

averaging 2 percent over time. Let me now turn to how the baseline outlook and the

associated risks and uncertainties figure in our monetary policymaking.

Implications for Monetary Policy

The period from 1950 through the early 1980s provides two important lessons for

managing the risks and uncertainties we face today. The early days of stabilization

policy in the 1950s taught monetary policymakers not to attempt to offset what are likely

to be temporary fluctuations in inflation. 15 Indeed, responding may do more harm than

good, particularly in an era where policy rates are much closer to the effective lower

bound even in good times. The main influence of monetary policy on inflation can come

after a lag of a year or more. If a central bank tightens policy in response to factors that

turn out to be temporary, the main policy effects are likely to arrive after the need has

passed. The ill-timed policy move unnecessarily slows hiring and other economic

activity and pushes inflation lower than desired. Today, with substantial slack remaining

in the labor market and the pandemic continuing, such a mistake could be particularly

harmful. We know that extended periods of unemployment can mean lasting harm to

workers and to the productive capacity of the economy. 16

History also teaches, however, that central banks cannot take for granted that

inflation due to transitory factors will fade. The 1970s saw two periods in which there

were large increases in energy and food prices, raising headline inflation for a time. But

when the direct effects on headline inflation eased, core inflation continued to run

15
As I discussed here two years ago, Milton Friedman first made this argument referring to the stop-and-go
policies in the 1950s. See Powell (2019) and Friedman (1958, p. 241). Bodenstein, Erceg, and Guerrieri
(2008) and Mishkin (2007) illustrate the problems that reacting to transitory sources of inflation can cause
using two of the Board staff’s models.
16
See, for example, Davis and von Wachter (2011).
 - 10 -

persistently higher than before. One likely contributing factor was that the public had

come to generally expect higher inflation—one reason why we now monitor inflation

expectations so carefully. 17

Central banks have always faced the problem of distinguishing transitory inflation

spikes from more troublesome developments, and it is sometimes difficult to do so with

confidence in real time. At such times, there is no substitute for a careful focus on

incoming data and evolving risks. If sustained higher inflation were to become a serious

concern, the Federal Open Market Committee (FOMC) would certainly respond and use

our tools to assure that inflation runs at levels that are consistent with our goal.

Incoming data should provide more evidence that some of the supply–demand

imbalances are improving, and more evidence of a continued moderation in inflation,

particularly in goods and services prices that have been most affected by the pandemic.

We also expect to see continued strong job creation. And we will be learning more about

the Delta variant’s effects. For now, I believe that policy is well positioned; as always,

we are prepared to adjust policy as appropriate to achieve our goals.

That brings me to a concluding word on the path ahead for monetary policy. The

Committee remains steadfast in our oft-expressed commitment to support the economy

for as long as is needed to achieve a full recovery. The changes we made last year to our

Statement on Longer-Run Goals and Monetary Policy Strategy are well suited to address

today’s challenges.

We have said that we would continue our asset purchases at the current pace until

we see substantial further progress toward our maximum employment and price stability

17
See, for example, Orphanides and Williams (2013) on the role of de-anchored inflation expectations.
This paper is in Bordo and Orphanides (2013), which discusses a wide range of related issues.
 - 11 -

goals, measured since last December, when we first articulated this guidance. My view is

that the “substantial further progress” test has been met for inflation. There has also been

clear progress toward maximum employment. At the FOMC’s recent July meeting, I was

of the view, as were most participants, that if the economy evolved broadly as

anticipated, it could be appropriate to start reducing the pace of asset purchases this year.

The intervening month has brought more progress in the form of a strong employment

report for July, but also the further spread of the Delta variant. We will be carefully

assessing incoming data and the evolving risks. Even after our asset purchases end, our

elevated holdings of longer-term securities will continue to support accommodative

financial conditions.

The timing and pace of the coming reduction in asset purchases will not be

intended to carry a direct signal regarding the timing of interest rate liftoff, for which we

have articulated a different and substantially more stringent test. We have said that we

will continue to hold the target range for the federal funds rate at its current level until the

economy reaches conditions consistent with maximum employment, and inflation has

reached 2 percent and is on track to moderately exceed 2 percent for some time. We have

much ground to cover to reach maximum employment, and time will tell whether we

have reached 2 percent inflation on a sustainable basis.

These are challenging times for the public we serve, as the pandemic and its

unprecedented toll on health and economic activity linger. But I will end on a positive

note. Before the pandemic, we all saw the extraordinary benefits that a strong labor

market can deliver to our society. Despite today’s challenges, the economy is on a path
 - 12 -

to just such a labor market, with high levels of employment and participation, broadly

shared wage gains, and inflation running close to our price stability goal.

Thank you very much.

 - 13 -

References

Bodenstein, Martin, Christopher J. Erceg, and Luca Guerrieri (2008). “Optimal

Monetary Policy with Distinct Core and Headline Inflation Rates,” Journal of
Monetary Economics, vol. 55, supplement (October), pp. S18–S33.

Bordo, Michael D., and Athanasios Orphanides, eds. (2013). The Great Inflation: The
Rebirth of Modern Central Banking. Chicago: University of Chicago Press.

Canon, Maria E., Marianna Kudlyak, and Marisa Reed (2015). “Aging and the
Economy: The Japanese Experience,” Federal Reserve Bank of St. Louis,
Regional Economist, vol. 23 (October), pp. 12–13,
https://www.stlouisfed.org/publications/regional-economist/october-2015/aging-
and-the-economy-the-japanese-experience.

Davis, Steven J., and Till von Wachter (2011). “Recessions and the Costs of Job Loss,”
Brookings Papers on Economic Activity, Fall, pp. 1–72,
https://www.brookings.edu/wp-content/uploads/2011/09/2011b_bpea_davis.pdf.

Forbes, Kristin J. (2019). “Inflation Dynamics: Dead, Dormant, or Determined

Abroad?” Brookings Papers on Economic Activity, Fall, pp. 257–319,
https://www.brookings.edu/wp-content/uploads/2020/10/Forbes-final-draft.pdf.

Friedman, Milton (1958). “The Supply of Money and Changes in Prices and Output,” in
The Relationship of Prices to Economic Stability and Growth: Compendium of
Papers Submitted by Panelists Appearing before the Joint Economic Committee,
Joint Committee Print, March 31, 85 Cong. Washington: Government Printing
Office, pp. 241–56.

Goodhart, Charles, and Manoj Pradhan (2020). The Great Demographic Reversal:
Ageing Societies, Waning Inequality, and an Inflation Revival. Cham,
Switzerland: Palgrave Macmillan.

Mishkin, Frederic S. (2007). “Headline versus Core Inflation in the Conduct of Monetary
Policy,” speech delivered at the Business Cycles, International Transmission and
Macroeconomic Policies Conference, HEC Montreal, Montreal, October 20,
https://www.federalreserve.gov/newsevents/speech/mishkin20071020a.htm.

Obstfeld, Maurice (2020). “Global Dimensions of U.S. Monetary Policy,” International

Journal of Central Banking, vol. 16 (February), pp. 73–132.

Orphanides, Athanasios, and John C. Williams (2013). “Monetary Policy Mistakes and
the Evolution of Inflation Expectations,” in Michael D. Bordo and Athanasios
Orphanides, eds., The Great Inflation: The Rebirth of Modern Central Banking.
Chicago: University of Chicago Press, pp. 255–88.

Powell, Jerome H. (2019). “Challenges for Monetary Policy,” speech delivered at

“Challenges for Monetary Policy,” a symposium sponsored by the Federal
 - 14 -

Reserve Bank of Kansas City, held in Jackson Hole, Wyo., August 23,
https://www.federalreserve.gov/newsevents/speech/powell20190823a.htm.
 Figure 1. Spending on Durable Goods Has Surged,
while Spending on Services Remains Weak
Trillions of chained 2012 dollars Trillions of chained 2012 dollars
3.2 9.0

8.5

2.8 Services (right axis)

8.0

7.5
2.4

7.0

2.0
6.5

Durables (left axis)

6.0
1.6

5.5

1.2 5.0
2018 2019 2020 2021
Note: The data are monthly estimates of real personal consumption expenditures and extend
through June 2021. Trend spending is shown by the dashed lines and is constructed using the
average growth rates from January 2018 to January 2020.
Source: U.S. Bureau of Economic Analysis.
 Figure 2. The Labor Market Is Recovering, but the Recovery Is Far from Complete
A. Change in nonfarm payrolls and total hiring B. Measures of unemployment
Thousands Thousands Monthly Percent
8000 4000 27 27

Adjusted unemployment rate

24 24

2000
21 21
7000
Payrolls (right axis)
18 18
0
15 15

Hires (left axis)

6000 -2000 12 12

9 9

-4000
6 6
5000 Unemployment rate
3 3
-6000 Long-term unemployment rate
0 0

4000 -8000 -3 -3
2018 2019 2020 2021 2018 2019 2020 2021
Note: Payroll data are three-month moving averages of total
Note: The data extend through July 2021. The long-term
nonfarm payroll employment and extend through July 2021. Total
unemployment rate is the share of the labor force that has been
private hire data are three-month moving averages and extend
unemployed for 27 weeks or more. The adjusted unemployment rate
through June 2021.
begins in February 2020 and is defined in footnote 5.
Source: U.S. Bureau of Labor Statistics.
Source: U.S. Bureau of Labor Statistics.
 Figure 3. Measures of Broad-Based Inflation
Generally Remain Moderate
Monthly Percent
4 4

18-month total PCE inflation

ex. durable goods
3 3
18-month core PCE inflation
ex. durable goods

2 2

12-month Dallas
1
Trimmed Mean (PCE) 1

0 0

-1 -1
2009 2012 2015 2018 2021

Note: Dallas Trimmed Mean data are 12-month percent changes and extend through June 2021.
Inflation excluding durables are 18-month annualized changes and extend through June 2021.
Source: Federal Reserve Bank of Dallas; Federal Reserve Board staff calculations.
Figure 4. Longer-Term Inflation Expectations Have Largely Reversed Earlier Declines
A. Selected indicators of inflation expectations B. Index of Common Inflation Expectations
Percent Quarterly Percent
3.5 3.5 2.2 2.2

3.0 Michigan survey, 3.0

price changes
next 5-10 years CIE projected on SPF, 10-year PCE inflation

2.1 2.1

2.5 2.5

2.0 2.0
Survey of Professional
Forecasters, 10-year 2.0 2.0
PCE inflation

1.5 1.5

TIPS, inflation compensation,

6-10 years ahead

1.0 1.0 1.9 1.9

2009 2012 2015 2018 2021 2009 2012 2015 2018 2021

Note: Treasury Inflation-Protected Securities (TIPS) data are monthly Note: The data extend through 2021:Q2. CIE is Index of Common
and extend through July 2021. The Michigan survey data are monthly and Inflation Expectations, and SPF is Survey of Professional Forecasters.
extend through August 2021; the August data are preliminary. Survey of Source: Federal Reserve Board staff calculations.
Professional Forecasters data are quarterly and extend through 2021:Q2.
PCE is personal consumption expenditures.
Source: Federal Reserve Bank of Philadelphia, Survey of
Professional Forecasters; University of Michigan Surveys of
Consumers; Federal Reserve Board staff calculations.
 Figure 5. Durable Goods Inflation Has Run Far below
That of Services for 25 Years before the Pandemic
Monthly 12-month percent change
8 8

6 6

4 Services 4

2 2

0 0

-2 -2

Durables
-4 -4

-6 -6
1996 2001 2006 2011 2016 2021
Note: The data are price deflators for personal consumption expenditures and extend through
June 2021.
Source: U.S. Bureau of Economic Analysis.
 Figure 6. Overall Wage Growth Remains Moderate
Percent
6 6

5 5
Atlanta Fed’s Wage Growth Tracker

4 4

3 3

2 2

1 1
ECI

0 0
1996 2001 2006 2011 2016 2021
Note: Employment Cost Index (ECI) data are 12-month percent changes ending in the last
month of each quarter and extend through 2021:Q2. Atlanta Fed’s Wage Growth Tracker data are
3-month moving averages of the 12-month percent change and extend through July 2021. The dashed
line represents missing data.
Source: U.S. Bureau of Labor Statistics; Federal Reserve Bank of Atlanta, Wage Growth Tracker.
 Figure 7. Inflation in Many Advanced Economies
Has Run Consistently below 2 since the Late 1990s
Monthly Percent
4 4

3 Canada Euro area 3

2 2

1 1

0 0

-1
Sweden Switzerland -1
Japan

-2 -2

-3 -3
1997 2000 2003 2006 2009 2012 2015 2018 2021

Note: The data are 36-month moving averages, extend through July 2021, and are based on
seasonally adjusted data except for Canada in 1995 and Japan from January 1995 through March 1999.
Source: For Japan, Ministry of Internal Affairs and Communications; for Sweden, Switzerland, and
the euro area, Statistical Office of the European Communities; for Canada, Statistics Canada; all
via Haver Analytics.