Saturday, February 28, 2015

Federal fund rate, median income, and core inflation.

Here, I've added a graph of core inflation to the previous graph. While the correlation between median income growth and the federal funds rates is not perfect, it's far stronger than the correlation between the federal funds rate and inflation. In 1994-95, for example, the FFR doubled, even though inflation (already at a near 10-year low), dropped slightly.

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