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Mean (or headline) PCE inflation has typically fallen below median PCE inflation, and since 2012 the difference has been large. To understand the reasons for this trend, we investigate which components of the headline measure are contributing to the difference. We find that energy components, which frequently undergo wide price swings, and electronics, which have been steadily decreasing in price for decades, explain most of the difference between the two inflation measures. We argue that the outsized impacts of such components on headline PCE inflation reinforce the need for policymakers to consider both headline and median PCE inflation measures., The Federal Reserve has a mandate from Congress to maintain price stability in the economy. To this end, the Federal Open Market Committee (FOMC) targets a 2 percent annual change [...]

Concerns about rising income inequality are based on comparing income distributions over time. It is important to remember that such distributions are snapshots of a single year, and that the same households do not necessarily appear year after year in the same quintile of the distribution. Paying attention to mobility, as well as inequality, gives us a richer picture of the income possibilities for households over time. We document changes in a measure of income mobility over the past 40 years, a period in which income inequality has increased. We find a modest level of movement through the distribution, particularly across generations. Nevertheless, the income quintile of one's parents still has a sizeable effect on just how high one is likely to rise or how low one may fall., The distribution of income has received considerable attention in recent years. This is not surprising given the high and rising levels of income inequality; but of equal importance is how [...]

Using a basic model to study both wealth and income inequality and their relations to long-run economic growth may lead to questionable conclusions. We consider a more complex model that includes realistic variation in the levels of income and wealth across households in addition to a new ingredient, luck in each household's labor productivity. Using this model, we determine that existing estimates of the elasticity of substitution between capital and labor are generally far away from the region where inequality would explode if long-run growth were zero., Inequality in wealth and income has become an issue of frequent debate, for not only policymakers but also the general public. Recently, the discussion has drifted toward a particular question [...]